2020 Annual Report
For the year ended 31 December 2020
Content
Performance Highlights FY2020
Chairman’s Letter to the Shareholders
CEO’s Letter to the Shareholders
Transforming the Way the World Works
Governance
Board of Directors
Senior Executives
Directors’ Report
Operating and Financial Review
Remuneration Report (Audited)
Auditors’ Independence Declaration
1
2
4
6
15
16
18
20
24
30
55
Financial Statements
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors Declaration
Independent Auditors’ Report
Shareholder Information
Appendix
Corporate Directory
56
57
58
59
60
61
86
87
93
96
97
ww Performance Highlights FY2020
Key operating and financial metrics ($US unless otherwise stated)
$27.7 million
Ending ARR
ARR growth
64%
$40.2 million
Revenue
Subscription revenue
growth 61%
85%
Subscription
retention rate
117%
Net revenue
retention
($2.4 million)
Operating EBITDA1
$43.7 million
Ending cash balance
ARR scaling ($ million)
Revenue composition ($ million)
89%
79%
63%
47%
27.7
10.9
16.9
6.7
10.2
5.8
4.4
2.6
FY2017
FY2018
FY2019
FY2020
FY2017
FY2018
FY2019
FY2020
New ARR added
Subscription
Perpetual, maintenance and support
11%
21%
37%
53%
1. Operating EBITDA excludes share based payments and foreign exchange gains and losses.
1
wwNitro Annual Report 2020 Chairman’s Letter
to the Shareholders
Dear Shareholders,
On behalf of the Board of Directors, it is my pleasure to present
Nitro’s full-year results and Annual Report. When I wrote to
you last year, the world was waking up to the threat of the
COVID-19 pandemic. None of us could predict what the year
would bring, and few were able to foresee the scale of the
human and economic devastation that would be wrought by the
virus. At Nitro, our immediate focus was the health and safety
of Nitronauts around the world while providing continuous
support to our customers during a time of great uncertainty.
What soon became clear, however, was that the virus would
trigger a dramatic shift in the way people work and, particularly,
in the way they handle documents.
Nitro had a front row seat to these immediate and enduring
changes. As the world adjusted to remote working, productivity
and processes anywhere, anytime have become the new normal.
Changes that would have taken years, were compressed into
weeks. Organisations were required to harness the potential of
digital workflow and collaboration tools to continue operating
efficiently. Paper-based processes were no longer an option.
And, for many, the Nitro Productivity Suite – with its ability to
improve productivity by making it more efficient to create,
convert, share, sign, and collaborate on documents digitally
– was a critical part of the solution. Nitro is proud of its work
supporting existing and new customers through this highly
disruptive period and beyond.
2020 performance
For Nitro, what started out as a year of uncertainty became
a year of significant achievement – one in which we kept
our people safe, exceeded our financial plan, and laid the
foundations to be a leader in accelerated digital transformation.
Once again, we met or exceeded our IPO prospectus numbers,
with 2020 ARR, subscription revenue and cash receipts all ahead
of forecasts. We have now sold more than 2.6 million licenses to
numerous customers, including 11,700 business customers, in
154 countries, including more than 68 per cent of Fortune 500
companies. We launched Nitro Sign as a stand-alone product in
June and have already executed more than 1 million eSignature
requests. With a robust balance sheet, supported by $43.7
million in cash at year end, we have all the ingredients to meet
our ambitious growth targets.
2
3Nitro Annual Report 2020 Chairman’s Letter
to the Shareholders
Our strategic investments in 2020 laid the
foundation for greater scale and enhanced
capabilities in driving even more impactful
solutions for our customers in 2021 and beyond.
Over the coming year, Nitro will continue to focus on executing
its growth strategy through attracting new customers to Nitro’s
productivity software platform, as well as through the increased
adoption of the Nitro Productivity Suite and Nitro Sign across its
enterprise, mid-market and SMB customer base.
On behalf of the Board, I would like to thank our shareholders
for sharing this exciting journey with us. We look forward to
updating you on our further success throughout the year.
Sincerely yours,
Kurt Johnson
Chairman
Nitro Software Limited
Our team
Our people are our number one asset. Our success is built on
the back of their passion, talent, and commitment. We welcomed
more than 50 people to our global team in 2020 and now have
180 Nitronauts in San Francisco, Dublin, Melbourne, and London
– many working remotely. We have significantly deepened our
leadership bench strength, with the appointments of a new
Chief Financial Officer, Chief Marketing Officer and Chief Product
Officer, as well as added talent recruited at VP and Director level
in critical areas of the business, including revenue operations,
design and user experience, product marketing, and more. We
are deliberately scaling up to drive even stronger growth in the
years to come. We are also supported by a network of channel
partners and resellers around the globe.
On behalf of the Board, I would like to thank all Nitronauts for
their extraordinary dedication, determination, and adaptability.
In a period of significant change, you not only adjusted to new
ways of working, you delivered another year of fantastic results.
Outlook
Our mission is clear: to help our customers more efficiently and
effectively manage their business processes and to accelerate
their digital transformation in a world that demands the ability
to work from anywhere, anytime. With a majority of Fortune 500
companies as customers, and more signing up every month,
we have proven success in delivering outcomes. Our targeted
investments in building scale and capabilities in the coming
year underpin our ambition to become a genuine leader in our
continuously expanding productivity and workflow market –
worth $28 billion and growing – and, in the process, deliver long-
term sustainable returns to our shareholders.
3
Nitro Annual Report 2020 CEO’s Letter
to the Shareholders
In a year marked by the global challenge of
COVID-19, we have stayed resolutely focused
on meeting our customers’ rapidly evolving
needs and building a platform for future growth.
Dear Shareholders,
Against a backdrop of significant global upheaval caused by
COVID-19, Nitro remained steadfastly focused on executing
our business priorities and growth strategy throughout 2020.
This was the year in which we built a solid foundation for future
growth. We strengthened our leadership team, we supercharged
our go-to-market strategy, we furthered our Document
Productivity Platform vision with the launch of Nitro Sign, and we
continued our transition to a SaaS subscription license business,
which is now nearing completion. Above all, we continued
to meet the rapidly evolving needs of our customers as they
adjusted to this new world of remote working. By demonstrating
the benefits of enhanced workflow productivity through our
suite of products, we were able to secure major new enterprise
contracts and achieve best-in-class customer retention rates
of 85 per cent and customer satisfaction scores of 94 per cent.
This is a testament to the grit and dedication of our talented
team of Nitronauts.
Key highlights for 2020
• Ending ARR of $27.7 million, up 64% YoY and ahead of
prospectus forecast;
• $40.2 million total revenue, in line with prospectus forecast;
business, we are scaling up and expanding our capabilities and
offerings to help customers on their journey from digitisation to
optimisation, and, ultimately, transformation across their entire
organisation. Our platform product strategy and roadmap are
designed to mirror this journey, ensuring we are standing by
customers every step of the way.
While our total addressable market is growing rapidly, with
remote work and digitisation tailwinds, Nitro has multiple levers
of growth it can pull:
• Expansion with existing customers, including providing
additional products and services;
• Winning new customers, with an 85 per cent product pilot
win rate;
• New product development, with several important launches
planned for 2021;
• Carefully considered mergers and acquisitions to add scale
and/or capabilities; and
• Expansion into new markets and channels.
Like everyone at Nitro, I am immensely proud of our achievements
in 2020 and excited about our potential in the years ahead.
• Subscription revenue of $21.2 million, up 61% YoY;
Sincerely yours,
• Subscription revenues now 53% of total revenue;
• 117% net revenue retention;
• $43.7million in cash, $5.8 million ahead of prospectus forecast;
• Helping customers maintain and accelerate business during
COVID-19; and
• More than 1 million eSignatures sent via Nitro Sign in 2020.
Vision & opportunities ahead
Our founding vision is to make document productivity easy,
powerful, and available to all. With the changes brought by
COVID-19, the journey of digital transformation has never been
more relevant or more urgent for organisations. Simply put, the
future of work demands it – and Nitro can deliver it. In 2020,
we laid the foundations for our growth strategy. In 2021, we
will continue to build upon these foundations by investing in
the world’s first Document Productivity Platform. Across the
4
Sam Chandler
Co-Founder and CEO
Nitro Software Limited
Nitro Annual Report 2020 5
Nitro Annual Report 2020 Transforming the way the world works
Nitro’s founding vision – to make
document productivity easy, powerful
and available to all – has never
been more relevant or more urgent.
COVID-19 has forever changed the
way the world works, and our market-
leading platform of products is helping
organisations thrive in this new normal.
68%
OF THE
Fortune 500
ARE NITRO CUSTOMERS1
1. Percentage of the 2019 Fortune 500 with paid Nitro licences.
Our vision
Why we do what we do
When we founded Nitro in a Melbourne laneway in 2005, we
had a simple vision: we wanted to make document productivity
easy, powerful, and available to all. Today, Nitro serves millions
of users every month, counts tens of thousands of businesses,
government agencies and educational institutions as its
customers, and has been deployed at scale throughout some
of the world’s largest and best-known organisations.
But the journey is only beginning. The challenges we identified in
2005, and that we set out to address, are still unresolved:
• Document inefficiency is everywhere;
• Customers can do better than their legacy solutions and
vendors; and
• Document productivity must evolve to be digital and smart.
COVID-19 – and the way it has forever changed how the
world works – has shone an uncomfortable spotlight on these
challenges and added urgency for organisations to address their
document productivity processes.
At Nitro, we are building the first global Document Productivity
Platform to help customers drive better business outcomes
through enhanced digital document processes and workflows
across the entire organisation.
We envision a world of end-to-end digital document workflows,
the final consignment of paper forms and signatures to history,
delightful product experiences for daily document tasks, and
powerful productivity for everyone.
Values that drive our success
We know that our success is only as good as the people behind
it, and we are committed to building a culture that not only
engages our Nitronauts but encourages them to innovate and
grow. Together, we push each other as professionals, inspire
each other as individuals, and support each other as friends.
Nitro has always put people at the center of what it does,
whether it is our customers or our employees. It comes back to
one of our core values: be good. Today, our 180-strong team
around the world consists of creatively intelligent and talented
people who care about building great products that delight our
customers and make them more productive, and we are doing it
in a way that is incredibly rewarding, making everyone proud to
be part of Nitro.
6
Nitro Annual Report 2020 Organisation Diversity 2019/2020
Nitronaut diversity
31%
33%
2019
2020
69%
67%
Male
Female
Did not identify
154 countries. The more important numbers to us, however, are
our best-in-class customer net revenue retention rate of 117 per
cent, net promoter score of 67, and customer satisfaction rate of
94 per cent. These figures, built on the quality of our products,
service and team, underpin our confidence for the future.
Throughout 2020 and into 2021, we have been sharpening
our go-to-market strategy to ensure continued excellence in
customer acquisition and retention. We have actively recruited
talent, with a focus on sales role specialisation, customer
segmentation, and support throughout a customer’s lifecycle.
We strive to be a world-class SaaS business with sales, support,
and service to match.
Organisation Region2019/2020
Organisation by region
Our solutions
2%
Digital transformation is more urgent than ever
53%
3%
2019
54%
45%
2020
45%
US
EMEA
APAC
Remarkable partnerships
Commitment to customer success is not just a slogan for us, nor
is it a task that is siloed off to one department. It is woven into
every decision we make, every product we offer, and it is the
driving force behind our success. Our promise to our customers
is simple: to help organisations of all sizes eliminate paper,
accelerate business processes, and drive digital transformation.
We started by helping individuals and small businesses do
more with their documents, and today we are helping drive
digital transformation at some of the largest companies in
the world. Nitro now has more than 11,700 customers across
Many documents are not just a document; they are essential to a
workflow, process, business outcome or critical KPI. Nobody, for
example, would doubt the importance of a document recording
accounts opened, deals closed, days to sale, compliance rates,
or data assurance.
Our research confirms that PDFs are still the most common
document type in every business, which means PDF productivity
remains one of the first places to look for immediate impact
and scale.
But what is remarkable and what has been exposed by
COVID-19, is how many documents are still handled in paper
form. Even if parts of a workflow are digital, paper-based
processes are still common. They are slower, more costly, have
inherent security liabilities, and often require people to work in
the same location.
Overall, current document workflows remain less efficient,
outdated, and a hindrance to productivity – a fact confirmed by
our Future of Work report that found 95 per cent of employees
see room for improvement in the way their organisations handle
documents.
7
Nitro Annual Report 2020 Transforming the way the world works
75%
69%
63%
of the documents knowledge
workers encounter are PDFs
work with PDFs once
or more a day
work with more than six
documents a day
Document processes remain a pain point
Workers are significantly more likely to indicate workflows are less efficient and not as up-to-date compared to last year.
61%
39%
95%
say their workflows
are very efficient
(vs. 71% in 2019)
say their workflows are
somewhat up-to-date at best
(vs. 35% in 2019)
see room for improvement
in how their organisations
handle documents
(vs. 97% in 2019)
Source: Nitro Future of Work Report Part 2, August 2020
8
Nitro Annual Report 2020 The Nitro Productivity SuiteTM
The Nitro Productivity Suite™ empowers organisations and knowledge workers through a suite of tools that improve document
productivity by making it more efficient to create, convert, share, sign, and collaborate on documents on any device with a web
browser, including mobile devices. This serves many modern organisations that have remote workers who need access to digital
document workflows and eSigning in one place.
The Nitro Productivity Suite comprises three core products: Nitro Pro™, Nitro Sign™ and Nitro Analytics™. Business customers
can manage users and licenses through the Nitro Admin tool take advantage of on-boarding, adoption, and change management
capabilities offered through our Customer Success team.
The successful launch of Nitro Sign as a standalone product in June 2020 signaled Nitro’s shift from a bundled strategy to a platform
strategy that will allow Nitro to grow revenue per customer and support customer retention rates.
PDF Productivity
eSigning
Insights & Intelligence
Best-in-Class Service
+
View, create,
and edit PDFs
Document
conversion
Secure
eSigning
workflows
Process
digitisation
User
adoption
management
Workflow
monitoring
Manage print
cost
Remote
collaboration
ROI
measurement
Unlock the power of smarter workflows.
24/7 support
team
Licence
management
User
management
9
Nitro Annual Report 2020 Transforming the way the world works
Helping customers during COVID-19
Paper’s waning reign
Work shifted with unprecedented speed
70%
The COVID-19 pandemic has fundamentally changed the way
businesses operate. Offices closed around the world and shifted
to entirely remote work. Many employees have yet to return, and
likely will not, as productivity and processes anywhere, anytime
have become the new normal. For many knowledge workers,
these changes were empowering. For many organisations, they
were bewildering. Organisations worldwide had no choice but
to accelerate their adoption of document management, digital
collaboration, and web conferencing tools to facilitate this urgent
digitisation. Paper-based processes are no longer just inefficient,
in many cases they are impossible.
Nitro drove the change
Printed documents vs. digital workflows
Pages Printed
Annotate & Collaborate
Sign
China Orders Lockdown
Feb 29
US Declares National
Emergency Mar 13
Italy Announces Quarantine
Mar 8
2/17
2/24
3/2
3/9
3/16
3/23
3/30
Source: NitroAnalyticsdatafrom17February2020to30March2020
60%
79%
63%
47%
56%
50%
50%
48%
44%
39%
Print
Scan
Mail physical
documents
Sign/approve
on paper
2019
2020
Source: Nitro Future of Work Report Part 2, August 2020
Remote work requires new solutions
Nitro has enjoyed a front row seat to this rapid digital
transformation. Analysis by Nitro shows eSigning and PDF
collaboration have increased dramatically during the pandemic,
while printing, scanning and physical signatures have declined.
This illustrates that some well-ingrained paper-based behaviors
will continue to change as remote work becomes more
permanent.
In June 2020, Nitro Sign was launched standalone eSignature
solution, offering customers a smarter and faster way to get
documents signed from anywhere. With unlimited electronic
signatures, advanced team and collaboration features,
integration within the Nitro Productivity Suite, document
intelligence capabilities, and cloud storage and business
workflow integrations, Nitro Sign enables businesses to shift to
100% digital document workflows and be productive from any
location. To help organisations of all sizes and industries navigate
the disruption caused by the COVID-19 pandemic, Nitro Sign was
made available free of charge in 2020, with standalone packaging
and pricing to be unveiled in 1H 2021.
10
Nitro Annual Report 2020 The future of work
Work-from-home as the new norm
Now, twelve months after organisations have shifted to remote work, many view this as a permanent arrangement.
The novel is becoming the norm
A work-from-home model is now less the exception and more of an expectation.
73%
plan to work from
home as much or
more frequently
after COVID-19
67%
83%
say WFH is very
or extremely
important when
considering future
job opportunities
say the way their
company handles
documents has
not improved
significantly during
the COVID-19
pandemic
Increased demand
& usage
881%
Increase in Nitro Sign
business users
in 2020
160%
Increase in Nitro Pro
total time spent
in 2020
Source: Nitro Future of Work Report Part 2, August 2020
Source: Nitro Analytics (for increased demand and usage)
Unfortunately, employers have not adequately grasped the opportunity presented by COVID-19 to improve their document
handling processes. To manage remote workforces – without sacrificing efficiency and productivity – organisations must embrace
workflow digitisation.
11
Nitro Annual Report 2020
Transforming the way the world works
The three eras of the future of work
Nitro has identified three eras across an organisation’s journey from analog processes to end-to-end, intelligent digital workflows.
1. The first era is Digitisation, in which analog, paper-based workflows are eliminated or streamlined with digital processes.
2. The second era is Optimisation, where the focus shifts to leveraging business intelligence to drive more business outcomes
from increasingly digital workflows.
3. The third era is Transformation and will ultimately be reached as these intelligent, and increasingly automated, workflows become
dominant throughout the entire organisation.
The Future of Work
Third Era
Transformation
First Era
Digitisation
Second Era
Optimisation
Intelligent workflows dominant
Focus shifts to digital speed,
reliability, quality, security
True digital transformation
achieved
Workflows shift to digital
Mostly “mechanical’ workflows
Highly fragmented product
categories
The rise of ‘intelligent’
workflows
Product rationalisation and
consolidation begins
Limited number of large vendors
own productivity and
workflow ‘stack’
12
Nitro Annual Report 2020 Building a platform for growth
Moving to a platform strategy
Nitro has designed its Document Productivity Platform to mirror this customer journey, overlaying its existing solutions and product
roadmap. With our current solutions for PDF productivity (Nitro Pro) and eSignatures (Nitro Sign), Nitro is enabling customers to
achieve Digitisation today. Nitro Analytics and our growing list of enterprise integrations and capabilities are also helping customers
achieve greater Optimisation, accelerating the shift to digital document processes and workflows. In the near future, we will be
introducing automation capabilities, as well as API and SDK capabilities to help customers achieve true Transformation throughout
their entire organisation.
With this strategy, Nitro is making the leap from a single-product company, with a bundled offering, to a true platform provider that
can offer workflow productivity solutions to organisations at any stage in the transformation journey. This strategy offers the potential
to grow relationships with existing customers, who today might use only one Nitro product, as well as unlock opportunities to reach
new customers and entirely untapped markets.
Nitro’s vision, backed by its product development pipeline, is to offer customers:
• Seamless, simple, and delightful document productivity from any device;
• Faster document processes with intuitive experiences and no-code automation;
• eSigning workflows optimised for individuals and teams;
• eSigning integrations with the most-used business apps;
• A vibrant ecosystem built around enterprise-grade document productivity and eSigning services; and
• Rich insights that make productivity visible for individuals and businesses.
We estimate the market for document productivity and workflow solutions is worth $28 billion globally. With our proven success to
date, the howling remote work tailwinds, our platform strategy, and our differentiated and growing suite of products, we are confident
that Nitro can become a clear leader in this market, delivering long-term growth for the company and its shareholders.
Second Era
Optimisation
Nitro Analytics
Insights & Intelligence
Nitro Licensing System
Rapid Deployment
Integrations
Salesforce
SharePoint, OneDrive
Power Automate
GSuite, Teams, Box, Dropbox
Cross-Platform
Mobile
Third Era
Transformation
Automation
Document Generation
Process Automation
Data Extraction
API
eSign
PDF Productivity
Automation
SDK
eSign
PDF Productivity
Automation
(Nitro COM &
Workflow Manager)
First Era
Digitisation
Nitro Pro
PDF Productivity
Nitro Sign
eSigning
Products
Platform
Integrated Automation
13
Nitro Annual Report 2020 Transforming the way the world works
Future Direction & Vision
Nitro is building the world’s first
Document Productivity Platform
Productivity
Workflow
Automation
API/SDK
Analytical
Insights
Centralised
Licensing
Customer
Success
Past, Present, and Future
1
Large Mature
Category
2
3
High-Growth SaaS
Categories
Digital-Transformation-
as-a-Service
PDF Productivity
PDF Productivity
Partner Model
eSigning
Insights & Intelligence
Perpetual Licensing
Subscription Licensing
Subscription Licensing + Services
14
Nitro Annual Report 2020 Governance
Nitro is committed to meeting high standards of corporate governance to create long term and sustainable shareholder value. The
Board supports the need for strong corporate governance, and this is reflected across the culture and business practice of the
organisation. Our policies are essential in enabling transparency and accountability across the organisation, and in protecting and
enhancing the interests of shareholders and other stakeholders. Nitro’s approach to corporate governance and our compliance with
the Recommendations of the ASX Corporate Governance Council are described in our Corporate Governance Statement, which is
available on our website at: https://ir.gonitro.com/investor-centre/?page=corporate-governance.
n
o
i
t
a
g
e
l
e
D
Shareholders
Board of Directors
Executive Chair – Kurt Johnson
Lead Independent Director – Lisa Hennessy
Composition – 7 members
Audit and Risk Management Committee
Chair – Sarah Morgan
Remuneration and Nomination Committee
Chair – Lisa Hennessy
Composition – 3 members
Composition – 3 members
CEO
Responsible for day-to-day management
Executive Team
Reports to the CEO and responsible for execution of the strategic objectives
Board composition – Diversity 2019
Board composition – Diversity 2020
25%
29%
75%
71%
Male
Female
Male
Female
A
c
c
o
u
n
t
a
b
i
l
i
t
y
15
Nitro Annual Report 2020 Board of Directors
Kurt Johnson
Executive Chairman
Kurt joined the Board as an
independent board member
in September 2010 and was
appointed Executive Chairman
on 1 April 2020.
Kurt has over 24 years of
professional management
experience, including public
and private company leadership
across a range of internet and
technology-based companies,
and is now an active angel
investor. He was previously an
investment banker with Olympic
Capital Partners, providing M&A
and financial advisory services
for middle-market companies in
the telecommunications, media,
and technology industries.
Special responsibilities
• Chair of the Board
Current ASX listed company
directorships
• Nitro Software Limited (since
September 2010)
Sam Chandler
Executive Director and
Chief Executive Officer
Sam co-founded Nitro in May
2005 and currently serves
as the CEO and Executive
Director. Sam is an experienced
entrepreneur, starting his first
company at age 16 while still in
high school. Since then, he has
started two more companies, sat
on the board of the Australian
Communities Foundation, and is
currently an investor and mentor
in Startmate, a leading Australian
tech accelerator. Sam has over
20 years of global technology
leadership experience, including
11 years living and working in
Silicon Valley, and was named
Ernst & Young’s Australian
Emerging Entrepreneur of the
Year in 2014.
Current ASX listed company
directorships
• Nitro Software Limited (since
September 2010)
Michael Brown
John Dyson
Non-Executive Director
Non-Executive Director
Michael joined the Board in 2014
on behalf of Battery Ventures
after their participation in the
Series B fundraising. Since
joining Battery Ventures in
1998, Michael has managed
multiple investments spanning
the enterprise software, financial
services and technology enabled
business-services markets.
He currently serves on the
boards of AuditBoard, CarNow,
Diametric Capital, Istra Research,
J. Hilburn, Joor.Michael was
previously involved with Battery’s
investments in Bluestem Brands
(acquired Capmark Financial
Group), Bonfire (merged into
GTY Technology), ChemConnect
(acquired by InterContinental
Exchange), and ExactTarget
(acquired by Salesforce.com).
He is currently on the board of
the US National Venture Capital
Association.
Current ASX listed company
directorships
• Nitro Software Limited (since
October 2014)
John joined the Board in July
2018 representing Starfish
Ventures, the manager of
Starfish Technology Fund II,
LP, a major shareholder in
the Company. He has over
24 years of experience working
in the venture capital industry,
investing in and supporting
companies in the technology
sector. John co-founded Starfish
Ventures in 2001. Prior to
that, was General Manager
(Australia) of JAFCO Asia for six
year and has over nine years of
experience in the investment
banking and stockbroking
industries.
Special responsibilities
• Member of the Remuneration
and Nomination Committee
Current ASX listed company
directorships
• Nitro Software Limited (since
June 2018)
• Audinate Group Limited (since
March 2017) Non-Executive
Director
16
Nitro Annual Report 2020 Lisa Hennessy
Lead Independent
Non-Executive Director
Sarah Morgan
Independent
Non-Executive Director
Richard Wenzel
Non-Executive Director
Board composition –
Tenure 2019
50%
25%
25%
Less than
1 year
Between
1–5 years
More than
5 years
Board composition –
Tenure 2020
57%
43%
Less than
1 year
Between
1–5 years
More than
5 years
Richard co-founded Nitro in
2005 and has been a Director
since. He also sat on the
boards of Nitro’s US and EMEA
entities. Richard is a pragmatic
entrepreneur who founded his
first company (ARTS PDF) in 1998
after a career in investment
banking. ARTS PDF was a leading
developer of PDF plugins and an
instrumental grounding in the
path to founding Nitro. Richard
has 21 years of experience in
document productivity and,
before his resignation from
Executive capacity effective
31 March 2020, he served as
the Senior Vice President of Tax
and Treasury and is responsible
for key treasury functions and
tax compliance. He also served
as the primary internal legal
advisor.
Current ASX listed company
directorships
• Nitro Software Limited (since
September 1999)
Lisa joined the Board in
November 2019. She is a highly
experienced executive and
company director with over
30 years of experience. Lisa
currently sits on the board
of several public and private
companies. Prior to serving as
a board member, Lisa spent
over a decade in strategy and
M&A roles in the US, including
Director of Strategy and M&A for
Del Monte Foods and Director at
GE Capital.
Special responsibilities
• Chair of the Remuneration
and Nomination Committee
• Member of the Audit and Risk
Management Committee
Current ASX listed company
directorships
• Nitro Software Limited (since
November 2019)
Former ASX listed company
directorships in the last
three years
• Murray River Organics Limited
(since August 2016 to January
2018) Non-Executive Director,
Chair of the Remuneration
and Nomination Committee
and Member of the Audit and
Risk Management Committee
Sarah joined the Board in
November 2019. She is an
experienced public and private
company director, particularly
in audit and risk management
capacity. Prior to becoming a
company director, Sarah spent
15 years as an Executive Director
for an independent corporate
advisory firm Grant Samuel,
specialising in M&A, public, and
private capital raisings.
Special responsibilities
• Chair of the Audit and Risk
Management Committee
• Member of the Remuneration
and Nomination Committee
Current ASX listed company
directorships
• Nitro Software Limited (since
November 2019)
• Adslot Limited (since January
2015) Non-Executive Director
and Chair of the Audit and
Risk Committee
• Whispir Limited (since January
2019) Non-Executive Director
and Chair of the Audit and
Risk Committee
• Future Generation Global
Company Limited (since June
2015) Non-Executive Director
Former ASX listed company
directorships in the last
three years
• Hansen Technologies
Limited (since October 2014
to December 2019) Non-
Executive Director and Chair of
the Audit and Risk Committee
17
Nitro Annual Report 2020 Senior Executives
Kurt Johnson
Executive Chairman
Sam Chandler
Executive Director and
Chief Executive Officer
Ana Sirbu
Chief Financial Officer
Gina O’Reilly
Chief Operating Officer
Refer to Kurt’s full bio on page 16.
Refer to Sam’s full bio on page 16.
Gina joined Nitro in 2008 as
COO, with global responsibility
for the Business Operations
and People functions, including
Employee Experience and
Talent. With over 15 years of
software industry experience,
Gina seeks to attract, retain,
and cultivate the best talent
at Nitro. She is passionate
about developing a creative,
challenging, fun, diverse, and
inspiring work environment that
makes every Nitronaut feel his
or her contribution helps to
grow the business. Prior to Nitro,
Gina oversaw global sales and
marketing at activePDF, a leading
provider of server-side PDF
solutions and developer tools.
Gina holds an MBA from the
University of Phoenix and a
Bachelor of Arts in International
Marketing & Languages from
Dublin City University, Ireland.
Ana joined Nitro in September
2020 and brings to Nitro strong
expertise in corporate and
operational finance within the
technology sector, most recently
as Chief Financial Officer at
BlueVine, a leading provider
of small business banking and
lending in the US. In this role,
she led the company’s finance,
strategy, capital markets and
analytics activities, playing a
critical role in BlueVine’s strong
growth and success.
Prior to joining BlueVine, Ana
led technology investment
activity at Google Capital across
the fintech and SaaS sectors.
She also previously held
investing, finance, and corporate
development roles at Skrill,
Silver Lake Partners and UBS
investment bank.
In September 2020, Ana was
recognised among the top
25 women leaders of 2020
in the financial technology
sector globally by The Financial
Technology Report. In November
2018, Ana was included on
the Innovate Finance Women
in FinTech Powerlist, which
recognises the contributions of
women leading innovation in
financial services.
Ana holds a Bachelor of Arts
in Economics from Harvard
University.
18
Nitro Annual Report 2020 Maria Robinson
Chief Marketing Officer
Maria joined Nitro in August
2020. As Nitro’s first-ever
Chief Marketing Officer, Maria
is responsible for driving
growth and awareness of
Nitro around the globe. Prior
to Nitro, Maria served as Vice
President of Growth Strategy
at Imperva. In this role, Maria
was responsible for Marketing
and SDR organisations leading
brand, digital, demand, web,
and ABM transformation, and
the transition to SaaS. She
also founded the Imperva
Women’s Network to help foster
greater diversity and inclusion
in technology. Prior to joining
Imperva, Maria held various
leadership roles in high growth
divisions at Intuit, LogMeIn,
and Citrix as well as healthcare
technology startups.
Maria holds a Bachelor’s degree
in Sociology and Global Studies
from Alverno College.
Mark Flannagan
Senior Vice President,
Global Sales
Mark joined Nitro in January
2020. As Senior Vice President
of Global Sales, Mark oversees
all of Nitro’s global Sales,
Customer Success, and
Revenue Operations. He is an
accomplished executive with a
proven track record of driving
high performance and business
transformation through focused
execution, often in challenging
and highly competitive market
segments.
Prior to Nitro, Mark was a
member of Marketo’s senior
leadership team in EMEA,
responsible for accelerated
growth across the region.
He also served as Executive
Vice President at Vistatec, a
global professional services
organisation, where he headed
up global sales, marketing and
strategy. Mark previously held
number of senior sales and
marketing leadership positions
in organisations, including
PFH Technology Group,
GlaxoSmithKline (GSK), and
Hewlett Packard.
Mark holds a Bachelor of
Commerce degree (Marketing
major) and a Postgraduate
Higher Diploma in Marketing
Practice from the National
University of Ireland, Galway.
Sam Thorpe
Chief Product Officer
David O’Donoghue
Vice President, Engineering
David joined Nitro in 2018 as VP
of Engineering. In this role, David
is responsible for overseeing
the global engineering team
across Dublin and San Francisco,
as well as all Nitro products.
David has over 30 years of
extensive experience developing,
coaching, and leading software
engineering organisations.
Prior to Nitro, Dave served as
Head of Engineering at Zalando
Ireland, Head of Software
Development at Full Tilt Poker,
Senior Development Manager
at Oracle, and Head of R&D at
Performix Technologies. David
holds a Master of Science (First
Class Honours) in Work and
Organisational Behaviour from
Dublin City University.
Sam rejoined Nitro in July
2020 as Chief Product Officer.
Before this, he served as CPO
at Flow Kana, responsible for
formulating the company’s
technology and data strategy to
accelerate the responsiveness
of all supply chain tiers. Prior
to Flow Kana, Sam served
as the Director of Product
Strategy at Nitro, where he led
strategy, customer research and
innovation toward synthesising
and unifying global product
strategy. Sam also played a key
role in the fund raising of tens of
millions of investment dollars.
Earlier in his career, Sam
built and led innovative,
high-performance product
organisations in start-up
environments, including two
different enterprise real estate
systems that were acquired
in succession by Fortune
500 companies. Sam holds a
Bachelor’s degree in Psychology
with a Business minor from
Humboldt State University.
19
Nitro Annual Report 2020 Director’s Report
The Directors present their report on the consolidated entity (referred to as ‘the Group’) consisting of
Nitro Software Limited and the entities it controlled at the end of, or during, the financial year ended
31 December 2020. All amounts are presented in US Dollars (‘USD’) unless otherwise stated.
20
Nitro Annual Report 2020
Principal activities
The principal activities of the Group during the year were the provision of document productivity software, including PDF productivity,
eSigning workflow, and analytics solutions, as well as associated maintenance and support services.
Corporate information
Nitro Software Limited is a company limited by shares that is incorporated and domiciled in Australia. The company’s registered
office is Level 7, 330 Collins Street, Melbourne, Victoria, Australia and principal place of business is 150 Spear Street, Suite 1500,
San Francisco, California, United States of America.
Details of Directors
As at the date of this report, the details of the Directors of the Company are as follows:
NAME
Kurt Johnson
Sam Chandler
Andrew Barlow
Michael Brown
John Dyson
Lisa Hennessy
Sarah Morgan
POSITION
Executive Chairman
Executive Director and Chief Executive Officer (‘CEO’)
Independent Non-Executive Director (Resigned 25 August 2020)
Non-Executive Director
Non-Executive Director
Lead Independent Non-Executive Director
Independent Non-Executive Director
Richard Wenzel
Non-Executive Director
The Directors listed above each held office as a Director of the Company throughout the period and until the date of this report,
other than:
• Kurt Johnson, who was appointed as an Executive Chairman effective 1 April 2020 and he performed duties of acting CFO from
1 April 2020 to 28 September 2020;
• Richard Wenzel, who ceased to be an Executive Director effective 31 March 2020;
• Lisa Hennessy, who was appointed as the Lead Independent Director effective 1 April 2020; and
• Andrew Barlow, who resigned from his position as Non-Executive Director on 25 August 2020.
Directors and meetings of Directors
The table below sets out the Directors of the Group and details the number of board and committee meetings held and attended by
those Directors, during the year ended 31 December 2020.
BOARD
AUDIT AND RISK COMMITTEE
REMUNERATION AND
NOMINATION COMMITTEE
Sam Chandler
Kurt Johnson
Andrew Barlow3
Michael Brown
John Dyson
Lisa Hennessy
Sarah Morgan
Richard Wenzel4
(A)1
18
18
12
18
18
18
18
18
(B)2
18
18
11
18
18
18
18
18
(A)1
(B)2
(A)1
(B)2
–
3
6
–
–
9
9
3
–
3
6
–
–
9
9
3
–
3
–
–
5
5
5
–
–
3
–
–
5
5
5
–
1. Number of meetings held during the time the Director held office and was eligible to attend as a member.
2. Number of meetings attended.
3. Resigned as a member of the Board of Directors and Audit and Risk Committee on 25 August 2020.
4. Appointed as a member of the Audit and Risk Committee on 23 September 2020.
21
Nitro Annual Report 2020 Director’s Report
The qualifications, experience and roles and responsibilities of Directors, including current and recent directorships, are detailed on
pages 16 to 17 of the Annual Report.
The remuneration, interests in securities and share options are detailed in the Remuneration Report on pages 46 to 53 of the
Annual Report.
Company secretary
Mark Licciardo (Company Secretary)
Mark was appointed as Company Secretary effective 21 November 2019. Mark is the founder and Managing Director of Mertons
Corporate Services Pty Ltd. As a former company secretary of ASX 50 companies, Transurban Group and Australian Foundation
Investment Company Limited, his expertise includes working with boards of directors in the areas of corporate governance, business
management, administration, consulting, and company secretarial matters. He is also the former Chairman of the Governance
Institute of Australia Victoria division, Academy of Design (LCI Melbourne) and Melbourne Fringe Festival and a current non-executive
director of a few public (including ASX listed) and private companies. Mark holds a Bachelor of Business Degree (Accounting) from
Victoria University and a Graduate Diploma in Company Secretarial Practice, is a Fellow of the Australian Institute of Company
Directors, the Institute of Chartered Secretaries and Administrators and the Governance Institute of Australia.
Kathleen Miller (Former Co-Company Secretary)
Kathy joined Nitro in January 2019 in the role of CFO and was appointed the Co-Company Secretary from 21 November 2019 till the
date of her resignation on 31 March 2020.
Officers
The names and roles of other Officers of the Company during FY2020 are shown in “Key Management Personnel” of the
Remuneration Report on page 32 of the Annual Report.
Insurance of Directors and Officers
The Company has agreed to indemnify the current Directors and certain officers of the Company and its controlled entities against
all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as Directors
and officers of the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith.
The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses. Under the
terms of the agreement, the Company will meet the full amount of any such liabilities, including legal fees.
Insurance premiums
The Group has paid insurance premiums in respect of Directors’ and Officers’ liability and legal expenses insurance contracts,
for current and former Directors and Officers, including senior executives of the Company and Directors, senior executives and
secretaries of its controlled entities. The insurance premiums relate to legal costs and expenses incurred by the relevant officers in
defending proceedings and other liabilities that may arise from their position, with the exception of conduct involving a willful breach
of duty or improper use of information or position to gain a personal advantage or to cause detriment to the Company. The terms of
the insurance contract require that the amount of the premium paid be kept confidential.
Auditor and non-assurance services
PricewaterhouseCoopers (PwC) continues in office in accordance with section 327 of the Corporations Act 2001. It is the Group’s policy
to engage PwC on assignments additional to their statutory audit duties where their expertise and experience with the Group are
important. These assignments are principally due diligence reporting on acquisitions and tax advice.
Details of the amounts paid or payable for non-assurance services and those in relation to the IPO in FY2019 by PwC are disclosed in
note 17 “Auditor’s remuneration” to the Consolidated Financial Statements on page 83 of the Annual Report. The Board of Directors
has considered the position and is satisfied that the provision of the non-assurance services is compatible with the general standard
of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-assurance
services by the auditor did not compromise the auditor independence requirements of the Corporations Act 2001 for the following
reasons:
22
Nitro Annual Report 2020 • All non-assurance services have been reviewed by the Audit and Risk Management Committee and the Board to ensure they do
not impact the integrity and objectivity of the auditor; and
• None of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants.
A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 55
of the Annual Report.
Proceedings on behalf of the Company
No proceedings have been brought or intervened in on behalf of the Company, nor have any applications for leave to do so been
made in respect of the Company, under section 237 of the Corporations Act 2001.
Environmental regulation
The operations of the Group are not subject to any particular or significant environmental regulations under a Commonwealth, State
or Territory law.
Significant changes to state of affairs of the Company
It is the opinion of the Directors that there were no significant changes in the state of affairs of the Group during the year, except as
otherwise noted in this report.
Subsequent events
The Directors are not aware of any matters or circumstances that have arisen since 31 December 2020 that have significantly affected
or may significantly affect the operations of the Group in subsequent financial years, the results of those operations, or the state of
affairs of the consolidated entity in future financial years.
Other information
The following information, contained in other sections of this Annual Report, also forms part of this Directors’ Report:
• Operational and Financial Review on pages 24 to 29 of the Annual Report;
• No dividends have been paid, declared or proposed;
• Likely developments in the operations of the Group are outlined in the “Outlook” section of the Operational and Financial Review
on page 29 of the Annual Report; and
• Remuneration Report on pages 30 to 54.
Rounding
The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (unless otherwise stated)
under the option available to the Group under ASIC Corporations (Rounding in Financial/Directors’ Reports) Instruments 2016/191.
The Group is an entity to which the legislative instrument applies.
This report is made in accordance with a resolution of the Directors.
Kurt Johnson
Executive Chairman
24 February 2021
Sam Chandler
Chief Executive Officer
24 February 2021
23
Nitro Annual Report 2020 Operating and financial review
This operating and financial review (‘OFR’) is designed to assist shareholders in understanding the Group’s business performance
and the factors underlying its results and financial position. It complements the financial disclosures in the Consolidated Financial
Statements on page 57 to 86. The OFR covers the period from 1 January 2020 to 31 December 2020, including the comparative
prior period and the prospectus forecast for the year ended 31 December 2020. To conform to the current period presentation,
comparative figures have been reclassified where appropriate.
The OFR also includes Software-as-a-Service (‘SaaS’) metrics that we believe are critical to the understanding of the performance of
the business. These SaaS metrics are non-IFRS measures and the manner in which these are calculated and trends they convey are
explained in Appendix to the Annual Report 2020.
24
Nitro Annual Report 2020 Strong 2020 performance
“Considering all the challenges that 2020 had to offer we are thrilled to present our results, with at-or-above plan performance on all
key metrics and strong subscription sales growth. We’ve managed successfully through the initial disruption caused by the COVID-19
pandemic and built a team to deliver the strategic objectives for Nitro.”
Sam Chandler Co-Founder & CEO
SUMMARY OF FINANCIAL RESULTS
US$ MILLIONS1
Subscription
Perpetual licence, maintenance and support
Total revenue
Cost of revenues
Gross profit
Sales and marketing
Research and development
General and administrative
Operating EBITDA
IPO Costs
Share-based payment expense
FX gains/(losses)
EBITDA
Depreciation and amortisation expense
Other
Loss after tax
SAAS METRICS
Annual Recurring Revenue (ARR) $million
Gross margin
Net Revenue Retention
Subscription retention rate
LTV/CAC (ratio)
Revenue
Subscription revenue
2020
21.2
18.9
40.2
(3.8)
36.4
(20.2)
(9.4)
(9.2)
(2.4)
(0.0)
(3.0)
(0.6)
(6.0)
(1.7)
0.1
(7.5)
2019
13.2
22.5
35.7
(3.7)
32.0
(18.9)
(7.2)
(7.0)
(1.1)
(3.0)
(0.8)
1.1
(3.8)
(2.0)
(2.1)
(7.9)
CHANGE
CHANGE %
2020F2
8.1
(3.5)
4.5
(0.1)
4.4
(1.3)
(2.1)
(2.2)
(1.3)
3.0
(2.1)
(1.6)
(2.1)
0.3
2.2
0.4
2020
27.7
91%
117%
85%
3.1x
61%
-16%
13%
3%
14%
7%
30%
31%
110%
-100%
254%
-151%
55%
-15%
-106%
-5%
2019
16.9
90%
126%
90%
2.8x
20.2
20.2
40.5
(4.5)
35.9
(21.3)
(10.3)
(8.4)
(4.0)
–
(1.3)
–
(5.3)
(1.8)
0.1
(7.0)
2020F
24.4
89%
NA
NA
NA
For 2020, subscription revenue increased by $8.1 million to $21.2 million, up 61% YoY from $13.2 million for the same period in 2019.
Subscription revenue was 53% of total revenue in 2020, up from 37% in 2019. This increase was primarily driven by new customer
wins, including many large enterprise customers, as well as expansions from existing subscription customers.
The Company measures growth in subscription revenue through New ARR added. New ARR added measures growth in subscription
licence revenue during the period as a result of sales of subscription licences to new customers, additional subscription licence sales
to existing subscription customers, and the conversion of maintenance and support contracts to subscription licensing. New ARR
added during 2020 was $10.9 million compared to $6.7 million for the same period in 2019. Consequently, ending ARR rose 64%
1. Totals may not add due to rounding errors caused by the figures being rounded to the nearest tenth of million dollars.
2. As per the IPO Prospectus.
25
Nitro Annual Report 2020 Operating and financial review
during 2020 to $27.7 million from $16.9 million at the end of the same period last year. Only 27% of New ARR added during 2020
was derived from perpetual customers with maintenance and support contracts transitioning to our subscription offering during the
course of the year.
Subscription revenue outperformed the IPO prospectus forecast for FY2020 by $1 million or 5% primarily on account of the increased
focus to transition to a subscription-based model.
Perpetual licence, maintenance and support revenue
Perpetual revenue, which includes perpetual licences, maintenance and support revenues, was $18.9 million in 2020, down 16% YoY
from $22.5 million in 2019. 2020 perpetual revenue comprised 47% of total revenue, down from 63% of total revenue in 2019. The
Company expects perpetual revenue to continue to reduce as a percentage of total revenue, given the rapid deliberate growth in
subscription sales and the success of the Nitro Productivity Suite.
Gross profit and gross profit margin
Gross profit increased by $4.4 million or 14%, to $36.4 million in 2020 compared to $32.0 million during 2019. The gross margin was
91% for 2020, compared to 90% for 2019. Cost of revenues decreased during 2020 as a percentage of total revenue compared to
2019 primarily due to the growth in and dominance of subscription licensing, which has a lower cost-of-sale than perpetual licensing.
Cost of revenues includes the cost of third-party technologies that are used to host Nitro’s cloud-based products, third-party
technologies that are embedded in the Company’s products, third party hosting and transaction services for the Company’s online
storefront, and employee and other operating costs associated with the Company’s customer support organisation.
Operating expenses
Sales and marketing
Sales and marketing expenses were $20.2 million in 2020, an increase of $1.3 million or 7% as compared to $18.9 million in 2019.
As a percentage of total revenue, sales and marketing expenses were 50% and 53% of total revenue in 2020 and 2019, respectively.
The increase in sales and marketing expense was primarily due to an increase in head count, which was 79 at the end of 2020 as
compared to 61 at the end of 2019. The sales and marketing expenditure is, however, lower than the prospectus forecast on account
of hiring deferrals, travel and event cost reductions, and general expense caution in light of the COVID-19 pandemic. These reductions
were partially offset by an increase in advertising during 2020.
The Company measures the efficiency of sales and marketing by monitoring LTV/CAC ratios. The LTV/CAC ratio was 3.1x for 2020
versus 2.8x for 2019.
Research and development
Research and development expenses were $9.4 million in 2020, an increase of $2.1 million or 30% compared to $7.2 million in 2019.
As a percentage of total revenue, research and development expenses were 23% of total revenue in 2020 compared to 20% in 2019.
The increase was primarily due to increased personnel cost. Total research and development employees at the end of 2020 were 64,
as compared to 42 at the end of 2019. Activities during the year included the development and launch of Nitro Sign™, and several new
product integrations and enhancements. During the year, all research and development costs were expensed, as they did not meet
the recognition and measurement criteria under the AASB 138.
General and administrative expenses
In 2020, general and administrative expenses were $9.3 million, an increase of $2.2 million or 32% compared to $7.0 million in 2019.
As a percentage of total revenue, general and administrative expense increased to 23% of total revenue in 2020 from 20% of total
revenue in 2019. This was primarily due to increase in costs associated investments ahead of anticipated growth and scale. We expect
this cost base to normalise as a percentage of revenue as we continue to grow.
Other items impacting the results
Share-based payments expense
Share-based payments expenses were $3.0 million in 2020, an increase of $2.1 million from $0.8 million in 2019. The increase was
primarily attributable to the awards to the Executive Chairman and the hire of a number of key executives and C-Level hires in 2H 2020.
26
Nitro Annual Report 2020 Finance costs, net
In 2020, finance costs, net were lower by $1.7 million due to the repayment of the Company’s outstanding debt in December 2019
following the IPO.
Cash flows
Cash and cash equivalents were $43.7 million as of 31 December 2020.
Operating cash outflow of $1.5 million in 2020 was higher than the operating cash inflow of $0.4 million in 2019. The increase in
operating cash flow for 2020 compared to the same period of 2019 was primarily due to increased cost operations given investment
in the business, partially offset by changes in other working capital. Gross receipts from customers in 2020 aggregated to $42.7 million
as compared to $40.2 million in 2019. Investing activities included $0.2 million in relation to premiums on foreign currency option.
Cash flow from financing activities included payments for leases of $1.4 million, IPO transaction costs $0.2 million and the purchase of
treasury shares of $0.1 million. This was partially offset by receipts from the proceeds from the exercise of stock options of $0.4 million.
COVID-19 update
Further to the update provided to the market during 2020, the impact of the COVID-19 pandemic on the Company has not been
material. At the beginning of the pandemic, we observed that many customers were focused on their initial pandemic response,
resulting in some cases in delays or reviews of new initiatives. More recently, however, businesses have been seeking to quickly
transform practices and processes to enable fully digital or fully remote work. Quite often these are technology investments that had
been planned over many years, brought forward and accelerated. Businesses are seeking solutions that deliver a positive end-user
experience and are also scalable, easy to implement and manage, and future proof.
The Company has seen this new and urgent demand across a number of areas as customers request solutions for rapid digitisation
to enable remote work productivity with a strong focus on document collaboration and eSigning capabilities. This demand highlights
the relevance and robustness of the Company’s product offering and business model.
Our response to the pandemic especially with relation to our team at Nitro has been swift and decisive, Nitro implemented
work-from-home (‘WFH’) effective 12 March 2020, ceased all travel and required self-isolation for returning travelers. To ensure
organisation productivity remained high, all Nitronauts were WFH-enabled with home office equipment, upgrades to computing
equipment and internet connectivity where required. Nitro’s ‘new normal’ operations included new meeting, check-in and
communication models, regular employee surveys, and expanded health and wellness programs. Given our prompt actions,
Nitronauts successfully remained engaged and productive throughout the course of the year.
With a balance sheet free from debt, a strong cash position and low operating cash requirements, the Company is well-positioned to
manage the business impact during this unprecedented period.
Launch of Nitro Sign™
In June 2020, Nitro Sign was launched as a standalone eSignature solution, offering customers a smarter and faster way to get
documents signed from anywhere. With electronic signatures suitable for numerous use cases, advanced team and collaboration
features, integration within the Nitro Productivity Suite, document intelligence capabilities, cloud storage and business workflow
integrations, Nitro Sign enables businesses to shift to 100% digital document workflows and their employees to be productive from
any location. To help organisations of all sizes and industries navigate the disruption caused by the COVID-19 pandemic, Nitro Sign
was made available free of charge in 2020. User acquisition, growth and usage goals, including signature volumes, are far exceeding
our internal targets. NitroSign standalone pricing and packaging will be introduced in 1H 2021.
Nitro’s growth strategy
The Company’s growth strategy is founded on five primary levers:
• Expansion within existing customers;
• Winning new customers;
• New product development;
• Mergers and acquisitions; and
• New markets and channels.
27
Nitro Annual Report 2020 Operating and financial review
Nitro expects to continue to attract new enterprise and mid-market Nitro Productivity Suite customers around the globe. Our new
customer acquisition strategy is supported by field and inside sales, sales development resources, marketing campaigns and brand
awareness, channel partners and existing customer referrals.
‘Land and expand’ is the Nitro go-to-market and customer success mantra. Nitro is focused on increasing the value it provides to
and in turn derives from existing customers over time, in several ways, including through an increase in the number of licences and
through an increase in the average selling price per licence. Customers typically add more user licences as their employee base
grows organically or inorganically, or if a decision is made that Nitro’s capabilities are required by an expanded number of knowledge
workers or workflows. Nitro expects to increase average contract values over time by cross-selling and up-selling Nitro Sign as well as
other new products and expanded features and integrations.
Nitro has an ambitious product roadmap for FY2021 and beyond. Nitro believes there are vast growth opportunities both in the core
markets of PDF productivity and eSigning, as well as adjacent markets of document productivity and workflow more broadly. Nitro is
committed to the following short to medium-term product development ambition:
• Seamless, simple, and delightful document productivity from any device;
• Faster document processes with intuitive experiences and no-code automation;
• eSigning workflows optimised for individuals and teams addressing most use cases;
• Developing further integrations with the most-used business apps;
• A vibrant ecosystem built around enterprise grade document productivity and eSigning services; and
• Rich insights that make productivity visible for individuals and businesses.
In addition to organic growth drivers explained above, Nitro may from time to time evaluate opportunities to acquire companies or
assets to accelerate product development, as well as product roadmap execution.
These growth levers, combined with the very large markets in which we operate and the accompanying accelerating growth trends
observable in 2020, provide enormous opportunity for the Company. Nitro estimates its total addressable market (‘TAM’) for PDF
document productivity and eSigning to be $28 billion1.
The COVID-19 pandemic is accelerating digital transformation around the world and increasing investments in document productivity,
workflow, and analytics solutions.
With Nitro’s strong history in selling these solutions into the largest organisations in the world, we are excited to deploy our capital
and resources to continue to grow our product offering and rapidly scale our customer base.
Proactive approach to risk management and response
Nitro deals with a variety of business risks, which it actively assesses and manages as part of its risk management framework
along with the Board and the Executive Team. Nitro’s core risks and the way they are managed are described below. This is not a
comprehensive list of the risks involved or the mitigating actions that have been adopted.
Strategic risks
Nitro has a clear strategy to ensure the continued growth of the organisation. The strategic direction, together with the Company’s
ability to successfully execute on that strategy, is critical to its future success. Nitro devotes a significant amount of time and resources
to developing, monitoring, and reviewing its strategic direction. This process involves a number of activities, including:
• Dedicated strategy days at Board and Executive level;
• Regular engagement with external subject matter experts and consultants, including competitive intelligence;
• Development of an organisation and reporting structure conducive to the execution of the strategic plans; and
• Ongoing monitoring and review of strategy within the organisation.
Nitro is confident that its thorough approach to the development, review, and execution of its strategy greatly reduces risk in this area.
1. Nitro Productivity Suite and Nitro Sign TAM calculated by estimating the total number of companies worldwide across our SMB, Mid-Market, Growth and
Enterprise segments using LinkedIn data and applying an Annual Contract Value (ACV) per segment for each product. Productivity Suite ACVs are based
on Nitro’s typical ACVs per segment achieved today, and Sign ACVs are based on typical eSigning contract values currently achieved by market leaders, but
discounted to reflect expected Nitro pricing and packaging.
28
Nitro Annual Report 2020 Cybersecurity, data protection, and third-party dependence
The use of information technology is critical to Nitro’s ability to deliver products and services to customers and the growth of its
business. Nitro’s products also involve the storage and transmission of its customers’ confidential and propriety data, which may
include sensitive personal or business information. By nature, information technology systems are susceptible to cyber-attacks, with
third parties seeking unauthorised access to data and financial theft, thereby causing disruption to business-as-usual services. Any of
these events could cause a material disruption to Nitro’s business and operations.
Nitro has based its data protection and cyber security protocols on the ISO 27000 suite of standards, the U.S. National Institute of
Standards & Technology Special Publication 800-53, and the EU GDPR regulation on data privacy. These standards enable Nitro to
maintain its certifications for SOC2 Type 2, HIPAA, and Privacy Shield. These are important accreditations that customers expect
when dealing with software providers in the industries in which Nitro operates. In certain circumstances, such accreditations
are also required to be maintained in order to allow Nitro to tender for and provide its product offering to certain clients
(e.g., government entities).
Nitro’s systems are designed, built, and managed to reduce the potential for security or data privacy breaches. Nitro Sign is dependent
on the performance, reliability, and availability of its own technology platforms, third party data centres and global communications
systems, including servers, the internet, hosting services, and the cloud environment in which it provides its products.
Nitro uses Tier 1 service providers for the provision of data centres for its key cloud services. These partners host data in highly
secure, fully redundant data centres, and communications infrastructure is similarly secure. Nitro’s relationships with these providers
are designed to maximise reliability and connectivity, with ongoing systems testing and monitoring.
Talent management
The success of the Company is dependent upon the ongoing retention of key personnel, including senior executives, as well as the
sales and product teams. In addition, Nitro needs to attract and retain highly skilled software development engineers, for which the
market is quite competitive.
Nitro continues to develop leadership, learning and development, as well as engagement initiatives to drive and deliver a results-
oriented and high-engagement culture. A best-in-class approach to remuneration, personal leave, wellness and healthcare benefits,
as well as an identifiable value system, has ensured that any risks emanating in relation to talent management are mitigated promptly
and suitably.
Our response to cyber security incident
During the year ended 31 December 2020, the Company reported a low impact, isolated security incident, which involved limited
access to a Nitro database by an unauthorised third party. Upon learning about the incident, the Company took immediate action to
ensure the Nitro environment was secure and commenced an investigation with the support of leading cybersecurity and forensic
experts. The investigation is now completed. The Company did not experience, and does not expect going forward, any material
financial impact in relation to the incident. Costs incurred from the remediation and mitigation of this incident were covered by the
Company’s cyber insurance policy.
Outlook
In FY2021, Nitro will continue to focus on delivering its platform product strategy, driving increased adoption of the Company’s PDF
productivity, eSigning and analytics solutions across new and existing customers in its enterprise, mid-market and SMB segments.
Nitro’s total addressable market in document productivity and eSigning is large and growing, supported by strong structural tailwinds
and changing work practices accelerated by COVID-19, and estimated at $28 billion. Given the scale of the market opportunity,
clear sector tailwinds, and the Company’s multiple growth levers, Nitro will be making key investments in FY2021, primarily focused
on product development and scaling its go-to-market organisation. Nitro will also continue to explore other targeted investments,
including potential acquisitions, in order to build capability and scale and further cement its leadership position in global document
productivity and workflow.
29
Nitro Annual Report 2020 Remuneration Report (Audited)
Message from the Chair of the Remuneration and Nomination Committee
Dear Shareholder,
On behalf of the Board, I am pleased to present Nitro Software Limited ’s Remuneration Report for the financial year to
31 December 2020.
2020 was a year of transformation for the Company as we strengthened our executive team through several key appointments,
including a new Chief Financial Officer, Chief Marketing Officer, Chief Product Officer and other Vice Presidents across the business.
These strategic hires were to ensure we have the necessary talent in place to support our pace of growth and future aspirations,
whilst continuing to deliver outstanding performance for our shareholders and executing on the commitment to broaden our
approach to remuneration as we transition to a public company since listing in December 2019.
Financial performance
We delivered strong results for our shareholders with both Total Shareholder Return (TSR) of 96%, and Annual Recurring Revenue
(ARR) growth of +64% YoY outperforming our market peers. Our operating EBITDA result of ($2.4) million was $1.6 million ahead of
Prospectus with our Revenue result in line at $40.2 million +13% YoY.
Remuneration outcomes
Our achievements above were reflected in the executive remuneration outcomes for this year. Executives on average received 99%
of their Short-Term Incentive (‘STI’) target for performance against a balance scorecard of measures and with the achievement of
140% of the Board approved Operating EBITDA target the overall pool was funded at the maximum of 112%. The tracking of our
2020 Long-Term Incentive (‘LTI’) relative TSR component (50%) at year end is above the 90th percentile of the peer group (S&P/ASX
All Technology Index (‘XTX’) inception companies).
KMP changes
During the first half, a number of key changes occurred within the executive team, including the departure of Kathy Miller (former
CFO) and the retirement of co-founder Richard Wenzel from his executive role. Both forfeited unvested options and STI opportunity.
Kurt Johnson was appointed Executive Chair and assumed the role of acting CFO whilst we undertook the search process.
Following an effective transition period, our new CFO, Ana Sirbu, commenced 28 September 2020. As part of Ana’s remuneration
arrangements, we provided her with a sign-on equity award (see details 2.d), as we did with a number of key executives and C-Level
hires in 2H 2020 to ensure that we attracted the top talent in the highly competitive San Francisco Bay area market. The combination
of these awards and our outstanding relative TSR performance primarily drove the increase to non-cash share-based compensation
expense against Prospectus ($3.0 million vs. $1.3 million).
With Kurt’s appointment as Executive Chair on 1 April 2020, I assumed the Lead Independent Director role and Richard Wenzel
assumed a Non-Executive Director role effective this date. On 25 August 2020, Andrew Barlow stepped off the Board after almost
fourteen years of service.
FY21 changes to remuneration
In 2020, the Remuneration Committee undertook a review of remuneration arrangements and governance practices to ensure
they continue to be fit for purpose, appropriate to the markets in which we compete for talent, and aligned with shareholders’
expectations. Resulting from this we will adopt the following changes in FY21:
STI
Within our existing balance scorecard framework, financial objectives will now be assessed jointly via a matrix reflecting the
importance in the relationship of ARR growth, whilst balancing the operating investment that drives that growth (Operating
EBITDA). The potential maximum opportunity will increase to 140% from 112% to further incentivise and reward for significant
outperformance.
30
Nitro Annual Report 2020 CEO
As part of the review, all executive roles were benchmarked within their local market context to determine if the amount and mix of
fixed and variable at-risk remuneration opportunities were appropriate to their position. In doing so, we identified that an adjustment
was necessary for the CEO for base salary and overall target opportunity resulting in a change to role’s pay mix increasing the variable
at-risk component. This took effect 1 January 2021.
The 2019 Remuneration Report received overwhelming support from our shareholders at the 2020 AGM and we look forward
to continuing to look for opportunities to improve our approach as we grow, key to which is ongoing dialogue. We welcome your
comments or feedback on any aspect of this Report.
Lisa Hennessy
Chair, Remuneration and Nomination Committee
24 February 2021
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Nitro Annual Report 2020 Remuneration Report (Audited)
Contents
1. Introduction
2. Overview of Executive Remuneration
a. Remuneration Principles
b. Remuneration Structure
c. Remuneration Framework (elements and target mix)
d. Service Agreements
e. STI Plans
f. LTI Plans
3. Performance Pay Outcomes (linking Group performance to performance pay outcomes for 2020)
4. Actual Performance Pay (statutory and actual tables)
5. Governance (Committee structure)
6. Non-Executive Remuneration
7. Additional Statutory Disclosures (other equity and KMP transactions required to be disclosed)
1. Introduction
The Directors of Nitro Software Limited present the Remuneration Report (‘the Report’) for the Company and its controlled entities
‘the Group’ for the year ended 31 December 2020. This Report forms part of the Directors’ Report and has been audited in
accordance with section 300A of the Corporations Act 2001.
The Report details the remuneration arrangements for the Group’s Key Management Personnel (‘KMP’) identified in the table below:
NAME
TITLE1
INDEPENDENT
TERM
Non-Executive Directors
Andrew Barlow
Michael Brown2
John Dyson2
Lisa Hennessy3
Sarah Morgan
Richard Wenzel4
Executive Directors
Sam Chandler
Kurt Johnson5
Other Key Executives
Director
Director
Director
Lead Independent Director
Director
Director
Chief Executive Officer
Executive Chair
Y
N
N
Y
Y
N
Ceased 25 August 2020
Full financial year
Full financial year
Full financial year
Full financial year
Full financial year
Full financial year
Full financial year
Kathleen Miller
Chief Financial Officer
Ana Sirbu
Chief Financial Officer
Ceased 31 March 2020
Commenced 28 September 2020
1. Title as at 31 December 2020.
2.
John Dyson and Michael Brown are considered not independent due to their ongoing relationships with major shareholders in the company, being Starfish
Technology Fund II, LP and Battery Investment Partners X, LLC and Battery Ventures X, L.P. respectively.
3. Appointed Lead Independent Director effective 1 April 2020.
4. Assumed Non-Executive Director capacity post retirement as Executive Director and Senior Vice President of Tax and Treasury effective 1 April 2020.
5. Appointed Executive Chair effective 1 April 2020 ceasing role of Independent Non-Executive Chair. Assumed CFO role in acting capacity for period 1 April to
27 September 2020.
Key Management Personnel are those persons who directly or indirectly, have authority and responsibility for planning, directing, and
controlling major activities of the Company and the Group.
References in the Report to executives only refer to ‘Executive Directors’ and ‘Other Key Executives’ identified above.
32
Nitro Annual Report 2020 There have been no changes to KMP after the reporting date and before the date the financial report was authorised for issue.
This Report is presented in the Company’s functional currency of USD. The actual exchange rate applied has been disclosed throughout.
2. Overview of executive remuneration
2.a. Remuneration principles
Executives receive fixed and variable at-risk remuneration consisting of short- and long-term incentive opportunities.
The Group’s remuneration strategy aligns with the Company’s values of Performance First, No BS and Be Good through the five key
reward principles that provide the foundation for reward design and quantum decision. The following table illustrates the link:
VALUE
Performance First
Generate strong alignment between employees and shareholders outcomes,
encouraging a focus on long -term decision making.
Enable meaningful accumulation of Nitro shares that drives an ownership
mentality and shareholder alignment.
No BS
Offer fair and competitive packages in the markets in which the Group
competes for talent.
Structure remuneration for senior employees to ensure collaboration towards
the achievement of the Company’s goal and together, share in its success.
REWARD PRINCIPLE
REWARD COMPONENT
Pay for performance
Variable at-risk
remuneration
Aligned to investor
interests
Fair and competitive
Attract, incentivise and
retain
Total Remuneration
(Fixed and variable at-
risk remuneration)
Be Good
Have the structure and transparency expected of an ASX listed company and
meet expectations of all stakeholders when determining pay.
Transparency
2.b. Remuneration structure
Applying the principles above, the Group aims to reward Executives with a level and mix of fixed and variable at-risk remuneration
appropriate to their position, responsibilities and performance in a way that supports the five pillars of business strategy.
FIVE PILLARS OF BUSINESS STRATEGY
HOW IS THIS INCORPORATED IN THE STRUCTURE?
1. Expansion of existing customers
2. Winning new enterprise customers
3. New markets and channels
Pillars 1, 2 and 3 are implicit in the Annual Recurring Revenue (‘ARR’) and
Revenue growth metrics measured and assessed as part of variable at-risk
remuneration for Executives’ through both the STI plan (financial objectives)
and 2020 LTI plan (revenue CAGR performance hurdle).
4. Continued investment in product development
Achievement against Pillar 4 is measured and assessed annually in the
relevant Executives’ STI non-financial objectives.
5. Acquisitions
2020 and 2021 LTI plan (revenue CAGR and relative Total Shareholder Return
(‘TSR’) performance hurdle).
The Executive remuneration framework was reviewed by the Nomination and Remuneration Committee and Board with reference to
the reward principles and market movements during FY20 with changes approved in FY21 to:
• Operation of the STI plan, performance measures and range (section 2.e);
• LTI plan, upwards revision to Revenue CAGR hurdle target (section 2.f); and
• CEO base pay and target opportunity (section 2.d).
The following pages provide detail of current framework, structure and highlights the proposed change to CEO pay mix in FY21.
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Nitro Annual Report 2020 Remuneration Report (Audited)
2.c. Executive remuneration framework
The table below details the structure:
COMPONENT
PERFORMANCE MEASURE
PERFORMANCE RANGE
VEHICLE
Fixed
D
E
X
I
F
Short-term incentive
K Long-term incentive
S
I
Local market review of
comparable roles in similar
companies based on the
scope of the Executive’s role
Actual payments reflect
individual skill, qualifications,
experience and market
conditions
Component consists of cash,
statutory superannuation/
pension contributions where
applicable and other non-
monetary benefits
Performance against Board
pre-agreed weighted financial
and non-financial KPIs (i.e.,
balanced scorecard) with a
financial gateway applied
0 to 112% of target
remuneration structure
Cash
Vesting conditional on future
performance hurdle (relative
TSR and revenue measure)
Grant based on a pre-
determined % of fixed
remuneration
Performance Rights
Sign-on equity award
(eligibility determined on a
case-by-case basis by the
Board)
Minimum vesting
requirements include time-
based service
At the discretion of the
Board with reference to an
individual's forgone incentives
and local market conditions
Performance Rights,
Restricted Share Awards
and Options
LTI
(performance rights)
3-year Performance Period (50% TSR and 50% Revenue CAGR)
Performance Period
STI
(cash)
Fixed
(cash)
Dec 20
Dec 21
Dec 22
R
-
T
A
E
L
B
A
R
A
V
I
K
S
I
R
-
T
A
D
E
X
I
F
34
Nitro Annual Report 2020
Remuneration mix
The target remuneration mix for the CEO and Executives in FY20 is shown below with long-term incentives (‘LTI’) based on the face
value of equity grants during the year.
CEO
CFO1
38%
36%
25%
37%
15%
48%
0%
10%
20%
30%
40%
50%
Fixed
STI
60%
LTI
70%
80%
90%
100%
1.
Intended target mix for CFO role appointed reflecting annualised value for Fixed, STI and 2020 LTI grant. The Executive Chair role does not have a specified
annual target mix due to its transitionary nature.
Change to CEO FY21 target mix:
The below graph the increase to the ‘at-risk’ component in FY21 for the CEO (section 2.d).
FY21
24%
18%
46%
FY20
38%
25%
37%
At risk
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Fixed
STI
LTI
At risk
35
Nitro Annual Report 2020 Remuneration Report (Audited)
2.d. Service Agreements
The components of the executive remuneration packages for our KMPs at year end are detailed below:
SAM CHANDLER
Executive Director, Co-Founder and Chief Executive Officer
Base Salary:
$300,000 per annum
Incentives:
Mr Chandler is eligible to participate in the Company’s 2020 STI plan (see section 2.e.) with target cash incentive
opportunity of $200,000 with a maximum potential bonus of $224,000.
Mr Chandler is eligible to participate in the Company’s 2020 LTI plan (see section 2.f.) with a target incentive
opportunity of up to 100% of fixed remuneration. Mr Chandler has been granted 267,000 performance rights
under this plan as approved at the 2020 AGM.
Benefits:
Mr Chandler is entitled to participate in the Company’s employee benefit plans, including paid leave, paid holidays,
medical, dental and vision insurance coverage.
Mr Chandler, under a legacy arrangement, also receives an annual allowance of $5,000 to be used towards air
fares for personal trips between his home country and the United States; $10,000 per annum for the cost of
maintaining his global pension fund; and up to $3,000 for the preparation and filing of his personal income tax
return.
Termination:
Employment may be terminated by either the Company or by Mr Chandler by providing six months written notice.
The Company may elect to pay Mr Chandler in lieu of all or part of such notice period. Mr Chandler may also be
required to serve out the whole or part of the notice period on an active or passive basis at the Board’s discretion.
Mr Chandler’s employment may be terminated by the Company without notice in certain circumstances such as
un-remediated material breach of contract, serious misconduct, bankruptcy, failure to comply with a reasonable
direction from the Board, and if a personal profit is made at the expense of the Company to which he is not
entitled.
In the event that Mr Chandler’s employment is terminated without cause he is entitled to six month base salary.
Other:
Mr Chandler is based in San Francisco, California, USA and has an open-ended employment contract with no non-
solicitation or non-compete obligations, as such obligations are not enforceable under Californian law.
The Board has adjusted Mr Chandler’s remuneration arrangements effective 1 January 2021 as follows:
• Base Salary $400,000 per annum;
• 2021 STI target cash incentive opportunity $300,000 with a maximum potential bonus of $420,000;
• 2021 LTI target incentive opportunity of up to 240% of fixed remuneration granted in performance rights
subject to shareholder approval at the 2021 AGM; and
• These changes are inline with Board’s target position of 25th percentile of external benchmark for role and
where the CEO was a founder of the Company.
ANA SIRBU
Chief Financial Officer
Base Salary:
$350,000 per annum
Incentives:
Ms Sirbu is eligible to participate in the Company’s 2020 STI plan (see section 2.e.) with an annual target cash
incentive opportunity of $150,000. For 2020 this amount has been prorated based on commencement date,
of which 50% was guaranteed.
Ms Sirbu is eligible to participate in the Company’s 2020 LTI plan (see section 2.f.) and has been granted 228,910
performance rights under this plan.
Benefits:
Ms Sirbu is entitled to participate in the Company’s employee benefit plans, details of which are provided under
Mr Chandler’s arrangements.
36
Nitro Annual Report 2020 Termination:
Employment may be terminated by either the Company or by Ms Sirbu by providing two months written notice.
The Company may elect to pay Ms Sirbu in lieu of all or part of such notice period with any such payment to be
based on her base salary over the relevant period. Ms Sirbu may also be required to serve out the whole or part
of the notice period on an active or passive basis at the Board’s discretion.
Ms Sirbu’s employment may be terminated by the Company without notice in certain circumstances such as
un-remediated material breach of contract, serious misconduct, bankruptcy, failure to comply with a reasonable
direction from the Board, and if a personal profit is made at the expense of the Company to which she is not entitled.
In the event that Ms Sirbu’s employment is terminated without cause she is entitled to six month base salary and
a prorated share of the annual bonus.
Other:
Ms Sirbu is based in San Francisco, California, USA and has an open-ended employment contract with no non-
solicitation or non-compete obligations, as such obligations are not enforceable under Californian law.
Ms Sirbu received the following sign-on equity awards in lieu of forgone benefits and incentives from her previous
employment and to provide alignment with shareholder outcomes:
• A combination of 1,030,097 Options and 1,030,097 (‘RSAs’) subject to time-based vesting conditions as
follows: 25% will vest on the first anniversary post grant date with remaining 75% to vest in monthly prorated
instalments over the 36 months following this date; and
• 27,391 RSAs equivalent to $50,000 vesting on the one-year anniversary of employment.
The Board in approving the sign-on award note the quantum was in line with desired target position between
50th and 75th percentile of the external market benchmark data for this role and determined Ms Sirbu will not be
eligible to participate in the 2021 LTI plan given commencement date in role (28 September 2020) and receipt of
a 2020 LTI equity award at sign-on.
KURT JOHNSON
Executive Chair
Base Salary:
$325,000 per annum
Incentives:
The Board in reviewing the proposed remuneration structure for the Executive Chair considered Mr Johnson’s
preference that any variable reward opportunity offered was directly aligned with shareholder outcomes in the
form of a performance-based equity award.
Mr Johnson was offered a target incentive opportunity of up to 300% of fixed remuneration under the Company’s
2020 LTI plan (see section 2.f). The Board decided upon the quantum in recognition of the role forgoing any
potential STI opportunity and its transitionary nature. Mr Johnson has been granted 946,000 performance rights
under this plan as approved at the 2020 AGM. The award has a two-year performance period measured solely on
a relative TSR hurdle.
Benefits:
Mr Johnson is entitled to participate in the Company’s employee benefit plans, details of which are provided under
Mr Chandler’s arrangements.
Mr Johnson also receives accommodation proximate to the Company’s head office in San Francisco and if the
Company is not able to provide such accommodation it will reimburse Mr Johnson’s reasonable accommodation
costs; and a travel stipend of $600 per week in which Mr Johnson commutes to the San Francisco office.
Termination:
Mr Johnson’s employment relationship is at-will and either Mr Johnson or the Company may terminate his
employment at any time without any advance notice.
The contract of employment with Mr Johnson commenced 1 April 2020 and ends 30 April 2021, unless terminated
earlier or extended at the discretion of the Board.
Other:
Mr Johnson is based in Camarillo, California, USA and has no non-solicitation or non-compete obligations, as such
obligations are not enforceable under Californian law.
Mr Johnson in FY20 received 100,000 fully paid shares in recognition of his additional contribution in FY19 that
was approved at the Company’s AGM, which are subject to voluntary escrow restrictions until the release of the
Company’s financial results for 2020 and ceasing the Executive Chair role.
37
Nitro Annual Report 2020 Remuneration Report (Audited)
2.e. Short-term incentive plans
Key features of the 2020 plan:
How is it paid?
Cash
How much can
Executives earn?
Executives have a target opportunity based on a percentage of their fixed salary that varies by role and has been
set with reference to comparable roles in similar companies. A total of 26 employees participate in the plan.
The maximum STI opportunity an Executive can earn is 112% of the target.
What is the Financial
Gateway?
A minimum level of Group financial performance is required to be achieved to ensure alignment with
shareholder outcomes prior to executives being eligible to receive an award under the plan.
For 2020 the Board determined the minimum level required was 90% of the Board approved Operating
EBITDA target (financial gateway).
How is it funded?
Upon achievement of the financial gateway, the Board will determine the pool size through an assessment of
Group Performance as follows:
1. Financial Performance against EBITDA, setting ranges:
• Between 90-99% of EBITDA – 70-99% of the target pool vests;
• At 100% of EBITDA – 100% of target pool vests;
• Above 100% of EBITDA up to 112% of target pool vests; and
2. Other financial and non-financial performance measures.
Where the Board has discretion to determine pool funding within a range it will consider other financial and
non-financial measures for the performance period with the intention to reward executives for significant
performance against strategic priorities.
Refer to Section 4 for actual results.
How is performance measured?
Balanced scorecard
Participant’s award is determined based on their achievement of financial and non-financial objectives.
A summary of the measures and weightings are set out below:
WEIGHTING
MEASURES (KEY PERFORMANCE INDICATORS)
Revenue1 (up to 30%)
Financial measures
Up to 80%
ARR (up to 30%)
EBITDA (up to 20%)
Non-financial measures
Up to 20%
Management by objectives
Role specific
1. Revenue represents the total of subscription, perpetual licence and support revenue.
Within the Financial measures the achievement against:
• Revenue target assessed on sliding scale with the ability for a participant to earn a score resulting in 120%
of the target in recognition of outperformance.
ACHIEVEMENT
90%
90-100%
100-110%
SCORE
80%
Straight line 80%-100%
Straight line basis 100-120%
• Operating EBITDA assessed on a pass/fail basis.
38
Nitro Annual Report 2020 Malus and claw back Malus and claw back apply to any awards made under this plan.
When is it paid?
The STI award is determined after the end of financial year following a review of performance against the
measures by the CEO and in the case of the CEO, by the Board. The Board approves the final award based on
this assessment, and the recommendation of the Remuneration Committee.
The amount is paid to an executive following the sign-off of statutory accounts or the announcement of the
Group’s full year financial results to which the performance period of the award relates.
What happens if an
Executive leaves?
If an executive resigns or is terminated for cause prior to the end of financial year, no STI is awarded for that year.
If an executive ceases employment during the performance period by reason of redundancy, ill health, death,
or other circumstances as approved by the Board, the executive will be entitled to a pro-rata cash payment
based on assessment of performance up to the date of ceasing employment for that year.
What changes are planned for 2021?
The Board has reviewed the operation of plan and made the following changes for 2021.
How much can
Executives earn?
The maximum STI opportunity an executive can earn will increase to 140% of target from 112% to further
incentivise and reward for significant out-performance on ARR and Operating EBITDA financial measures.
How is performance
measured?
An executives’ performance will continue to be assessed through a Balanced Scorecard with the weighting on
Financial Objectives limited to 80%.
A summary of the measures and weightings are set out below:
Financial measures
WEIGHTING
Up to 80%
Non-financial measures
Up to 20%
Financial measures
MEASURES (KEY PERFORMANCE INDICATORS)
ARR and Operating EBITDA
Management by objectives
Role specific
The key change relates to measures within financial objectives and outcome determination. This will now be
assessed jointly via a matrix reflecting growth of the business (ARR) and the investment made to achieve that
and future growth (Operating EBITDA).
The limits of the matrix (ranging 60-150% score) have been set with reference to ARR and Operating EBITDA
outcomes against the Board approved targets and will be disclosed retrospectively due to their sensitive nature.
A zero outcomes will occur if either the:
• The ARR outcome is less than 85% of target; or
• The Operating EBITDA loss outcome is a loss greater than 20% of the target, with the Board maintaining
discretion if this instance occurs jointly with significant outperformance against ARR.
Non-financial measures
There is no financial gateway for non-financial measures and the maximum opportunity is 100%.
The Board views the proposed changes as key in driving performance outcomes for executives that align with the creation of
sustainable growth and shareholder wealth in the longer term.
39
Nitro Annual Report 2020 Remuneration Report (Audited)
2.f. Long-term incentive plans
Since the Company was established, LTI plans have been designed to award participants with the opportunity to:
• Allow a meaningful accumulation of shares over time to inspire an ownership mentality; and
• Generate a strong alignment with shareholder outcomes by encouraging a focus on long-term decision making.
The type and nature of these awards has evolved with the growth and maturity of the Company as well as changes in ownership. As a
result, four LTI plans are referred to within this Report:
1. 2020 LTI plan (reflecting changes to awards granted post the IPO);
2. 2021 LTI plan (reflecting minor changes to the 2020 LTI plan);
3. 2019 LTI plan (awards granted in November 2019 to coincide with the IPO); and
4. Historical LTI plan (outstanding awards granted prior to April 2019).
2020 LTI plan
How is it paid?
Executives are eligible to receive performance rights (being a right to acquire an ordinary share at zero
consideration).
How much can
Executives earn?
The CEO had a target LTI opportunity of up to 100% of fixed remuneration and Executives had a target LTI
opportunity of up to 60% of their respective total fixed remuneration.
The details and rationale relating to the opportunity provided to the Executive Chair under this plan are
provided further down.
The number of performance rights issued will be determined by the dividing the AUD equivalent award value
by the share price as at close of trading on 31 December 2019 (10-day VWAP).
How is performance
measured?
Awards are subject to two measures equally weighted: relative Total Shareholder Return and Revenue
performance hurdle.
Relative TSR
The Company’s TSR over the relevant Vesting Period will be assessed against the relative TSR performance of
the companies in the S&P/ASX All Technology Index (XTX) (Comparator Group).
The proportion of Rights that will vest will be determined by reference to the percentile ranking of the
Company’s TSR performance relative to the TSR performance of the Comparator Group during the relevant
Vesting Period, in accordance with the following vesting schedule:
COMPANY’S TSR RELATIVE TO COMPARATOR GROUP
PERCENTAGE VESTING
Below the 50th percentile
At the 50th percentile
0%
50%
Greater than the 50th percentile less than 75th percentile
Pro-rata straight-line basis 50% to 100%
Equal to or greater than the 75th percentile
100%
40
Nitro Annual Report 2020 How is performance
measured?
(continued)
Revenue performance hurdle
The proportion of Rights that will vest will be determined by reference to the Company’s compound
annual revenue growth during the performance period. The relative revenue performance targets and
corresponding vesting percentages are as follows:
COMPANY’S COMPOUND ANNUAL REVENUE GROWTH OVER THE
PERFORMANCE PERIOD
PERCENTAGE VESTING
Less than 15%
15%
0%
50%
Greater than 15% but less than 20%
Pro-rata straight-line basis 50% to 100%
Equal to or greater than 20%
100%
When is
performance
measured?
Performance is measured at the end of the three-year performance period.
Malus and claw back Malus applies to any awards made under this plan.
Awards will also be subject to claw back for any material financial misstatements in relation to Nitro’s
performance for the relevant period which are subsequently revealed.
What happens if an
Executive leaves?
If a participant ceases employment in ‘bad leaver’ circumstances (including resignation, dismissal for cause or
poor performance), all of their unvested Awards will be forfeited or lapse.
Unless otherwise determined by the Board, if a participant ceases employment in ‘good leaver’ circumstances,
such as disability or redundancy, a pro-rata portion of unvested LTI awards will remain on foot subject to any
applicable Vesting Conditions and Exercise Conditions set out in the Letter of Invitation and plan rules at the
time of award. Any LTI rights that remain on foot may be settled by the company in cash or shares.
Notwithstanding the above, the Board may also, subject to any requirement for shareholder approval,
determine to treat awards in a different manner to that set out above.
The Board may in its sole and absolute discretion, and subject to the Listing Rules, determine the treatment
on unvested instruments.
Under this offer, executives are not entitled to any dividends on shares.
What happens if
there is a change of
control?
Are executives
eligible for
dividends?
What changes are planned for 2021?
For the 2021 awards, the Board has determined the existing structure of the plan with the dual hurdles of relative TSR and Company
Revenue CAGR issued in performance rights continues to meet with the design principles of generating strong alignment with
shareholder outcomes by encouraging a focus on long-term decision making. The Board has approved minor changes within the plan
operation, including:
• The CEO’s target opportunity will be up to 240% of fixed remuneration subject to shareholder approval at the 2021 AGM;
• An increase in the hurdle rate (the point at which vesting commences) for the Company’s Revenue CAGR target to 25% from 15%
(2020 grant); and
• The inclusion in the rTSR performance calculation methodology of a 20-day smoothing element based on the volume weighted
average price.
Future awards may be subject to different hurdles as the business matures.
41
Nitro Annual Report 2020 Remuneration Report (Audited)
2019 LTI plan
Under the 2019 LTI plan a grant of share options with three tranches were made to Executives at the time of the IPO to align
remuneration with shareholder outcomes over the longer term.
How is it paid?
Executives are eligible to receive share options (being an option to acquire an ordinary share in the upon
payment of a pre-determined exercise price).
Consistent with market practice in the United States, the Board may permit exercise of options by way of a
Cashless Exercise. Under this arrangement the Company will only issue or transfer such number of shares
that have a value equal to the total market value of shares that would have been issued or transferred if the
options had been exercised other than by way of Cashless Exercise, less the total amount of the exercise
price that would otherwise have been payable on exercise.
Share options will expire 10 years after the end of the performance period unless determined otherwise
earlier by the Board.
How much can
Executives earn?
The grant size was determined based on an assessment of pre-existing awards and competitive positioning
against market prior to IPO.
When is
performance
measured?
The grant has been issued in three tranches with performance period commencing 1 January 2019 for
tranches 2 and 3 as follows:
TRANCHE
WEIGHTING
PERFORMANCE PERIOD
1
2
3
33%
33.5%
33.5%
Immediately exercisable upon completion of IPO
24 months ending 31 December 2020
36 months ending 31 December 2021
How is performance
measured?
TRANCHE
WEIGHTING
PERFORMANCE PERIOD
1
2
3
33%
33.5%
33.5%
Event based: IPO completion 100% vest and exercisable.
Gateway FY19 Revenue outlined in the Prospectus with Vesting
Outcomes subject to FY20 Revenue as outlined below.
Performance against Board approved target FY21 Revenue will be
assessed subject to Vesting Outcomes as outlined below.
Revenue performance against targets for tranches 2 and 3 will be assessed as follows:
TARGET REVENUE
Below 100th percentile
Up to and including 100th percentile
VESTING OUTCOME
0%
50%
Greater than 100th percentile but less than
120th percentile
Pro rata straight line basis 50-100%
Equal to or greater than the 120th percentile
100%
Tranches will not be subject to retesting.
Claw back and Malus
Awards are subject to claw back and Malus as detailed in the plan rules (clauses 20 and 21) lodged with
the ASX.
What happens if an
Executive leaves?
Consistent with the 2020 LTI plan.
42
Nitro Annual Report 2020 Consistent with the 2020 LTI plan.
Consistent with the 2020 LTI plan.
What happens if
there is a change of
control?
Are Executives
eligible for dividends?
Historical LTI plan
Prior to IPO, the Company granted options and share awards that were prevalent with market practice for a private technology
company based in the United States.
The Company ceased granting new awards under this plan in March 2019. Options and shares previously granted continue to be
governed by the terms that were amended at the time of the IPO to comply with the ASX Listing Rules.
The following table summarises the total outstanding awards held by Executives at 31 December 2020, including those still subject to
vesting criteria and vested but not yet exercised.
Executive
Grant date
Number of options granted
Options vested as at 31 December 2020
Unvested options
Exercise price currency
Exercise price
Performance hurdle
Vesting period
Vesting conditions
Cessation of employment
25 Nov 11
3,159,900
3,159,900
0
AUD
0.2048
NA
NA
NA
Sam Chandler (CEO)
28 Feb 16
1,586,421
1,546,758
39,663
USD
0.3089
NA
60 months
Options vest on a straightline basis
over the vesting period subject
to accelerated vesting conditions.
Accelerated vesting for 12 months
on date of grant.
The company has agreed that all unvested options under the
Historical LTIP will vest immediately if the Executive is terminated
other than or cause, or resigns for good reason, in the 12 months
following Completion.
43
Nitro Annual Report 2020 Remuneration Report (Audited)
3. Performance pay outcomes
(Linking Group performance to peformance pay for 2020)
The Group delivered strong results for our shareholders with Total Shareholder Return (‘TSR’) of 96%, a result above the 90th percentile
of our market peer group (S&P/ASX All Technology Index (XTX) inception companies) for the period 1 January to 31 December 2020.
The Group also achieved a strong set of financial results with the following highlights:
• ARR of $27.7 million, achieving 103% of Board approved STI ARR target;
• Growth of Revenue +13% YoY to $40.2 million, achieving 97% of STI revenue target;
• Operating EBITDA loss of ($2.4) million, $1.6 million, better than Prospectus forecast; and
• For 2020 the achievement of 140% of the Board approved operating EBITDA target resulted in the maximum funding of the pool
at 112%.
The 2020 STI scorecard outcomes for Executives reflect this and are detailed in the table below.
ACTUAL OUTCOME
MAXIMUM
EXECUTIVE
Sam Chandler
Ana Sirbu1
SCORECARD
OUTCOME
TARGET
OPPORTUNITY
(% OF FIXED)
98%
100%
67%
48%
% OF
FIXED
73%
54%
1. Outcome for Ana Sirbu reflects prorated opportunity for 2020.
OPPORTUNITY
(% OF FIXED)
$
ACTUAL EARNED
AS A MAXIMUM
OPPORTUNITY
$
219,253
43,680
75%
54%
98%
100%
As required, information about the Groups’ earning and movements in shareholder wealth in US dollars for the past five years, up to
and including the current financial year, as required are set out in the table below.
ARR ($m)
Revenue ($m)
NPAT ($m)
Share price at year end (A$)
Total Shareholder Return
Basic EPS (cents)
Total Dividends
2020
27.70
40.20
(7.54)
3.20
96%
(0.04)
NA
2019
16.90
35.67
(7.93)
1.63
-5%
(0.11)
NA
2018
10.20
32.41
(5.52)
NA
–
(0.08)
NA
20171
4.40
26.74
(12.40)
NA
–
–
NA
20161
–
28.39
(17.45)
NA
–
–
NA
1. Does not include the impact of AASB 15 Revenue from contracts with customers and AASB 16 Leases.
The Board does not intend to declare a dividend in the near future as outlined in the Prospectus and will continue to use funds raised
for future activities and growth.
Tranche two of the 2019 LTI plan required 100% of FY19 and FY20 Prospectus target revenue to be met for pro rata vesting to
commence at 50% (section 2.f). The FY20 Revenue result of $40.2 million was a 99.3% attainment of this target. With the FY20 financial
outperformance on ARR and Operating EBITDA, the Board elected to exercise discretion and deemed the target to be met resulting in
a vesting outcome of 50% to eligible participants.
44
Nitro Annual Report 2020 4. Actual performance pay
Executive remuneration actual cash received
The actual remuneration received by Executives in FY20 is set out below. This information is considered to be relevant as it provides
shareholders with a view of remuneration actually paid to Executives for performance in FY20 and the value of LTIs that vested during
the period. This differs from the remuneration details prepared in accordance with statutory obligation and accounting standards as
per the table directly following, that include the value of options and performance rights that have been awarded but which may or
may not vest.
With Kurt Johnson and Richard Wenzel having performed roles in both an Executive and Non-Executive Director capacity throughout
FY20, this table includes their Non-Executive Director fees received.
EXECUTIVES
NOTE
Sam Chandler
Kurt Johnson
Ana Sirbu
Former Executives
Kathleen Miller
Richard Wenzel
FIXED
DIRECTOR FEES
1
313,452
325,231
81,069
88,796
119,820
2
–
31,500
–
–
30,000
STI
3
184,586
–
–
208,575
48,275
LTI VESTED
TOTAL
4
=1+2+3+4
601,732
221,888
–
471,985
–
1,099,770
578,619
81,069
769,356
198,095
Includes salary, superannuation, other monetary and non-monetary benefits.
1.
2. Director fees relate to fees paid in relation to their Non-Executive capacity.
3. STI amounts paid in 2020 (FY20) relating to 2019 (FY19) award.
4.
Intrinsic value of LTI that vested throughout 2020 (calculation applied Share Price at year end and the annual average FX rate AUD 1 = USD 0.6934).
45
Nitro Annual Report 2020
Remuneration Report (Audited)
Executive remuneration statutory accounting method
The amounts shown in this table are prepared in accordance with AASB 124 Related party disclosures and do not represent actual
cash payment received by Executives for the year ended 31 December 2020. Amounts shown under long-term benefits reflect the
accounting expense recorded during the year with respect to prior year awards that have or are yet to vest. For performance payment
and awards made with respect to FY20 refer to the Performance Pay Outcomes section of the Report.
YEAR
SALARY
DIRECTOR FEES
STI CASH BONUS
OTHER
MONETARY
BENEFITS
NON-MONETARY
BENEFITS
TOTAL
BENEFITS
ANNUAL LEAVE
BASED)
PAYMENTS
TOTAL
POST
EMPLOYMENT
OPTIONS AND
RIGHTS
(TIME -BASED
VESTING)
OPTIONS
AND RIGHTS
(PERFORMANCE
SHARE-BASED
TOTAL
%
PERFORMANCE
RELATED
SHORT TERM
LONG TERM
Sam Chandler
2020
300,000
2019
300,000
–
–
Kurt Johnson1
2020
235,000
31,500
2019
–
89,985
Ana Sirbu2
2020
80,769
2019
–
Former Executives
Kathleen Miller3
2020
80,769
2019
329,808
–
–
–
–
219,253
–
13,452
532,705
8,762
136,008
144,770
677,475
184,586
18,000
11,676
514,262
35,383
36,641
222,473
259,114
808,759
–
–
–
–
43,680
300
–
–
208,575
–
–
–
90,231
356,731
106,377
402,755
509,132
865,863
–
–
89,985
124,749
–
8,027
88,796
27,721
566,104
419,062
28,584
447,646
572,395
–
–
89,985
–
–
–
–
–
–
3,628
3,628
92,424
4,276
285,624
74,162
359,786
930,166
Richard Wenzel4
Total Executive
2020
62,308
30,000
–
82,212
5,301
179,821
2,850
182,671
2019
225,000
–
48,275
18,000
18,694
309,969
25,962
–
37,081
37,081
373,012
2020
758,846
61,500
262,933
82,512
117,011
1,282,802
2,850
–
537,829
567,347
1,105,176
2,390,828
2019
854,808
89,985
441,436
36,000
58,091
1,480,320
65,621
322,265
333,716
655,981
2,201,922
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
52%
50%
47%
0%
13%
–
0%
30%
0%
23%
1. Appointed Executive Chair effective 1 April 2020 and ceased role of Independent Non-Executive Chair. Assumed CFO role in acting capacity for the period
1 April to 27 September 2020. Non-monetary benefits relate to travel and accommodation.
2. Commenced CFO role 28 September 2020.
3. Ceased CFO role effective 31 March 2020.
4. Assumed Non-Executive role effective post retirement as Executive Director and Senior Vice President of Tax and Treasury effective 1 April 2020.
Other monetary benefits relate to reimbursement of relocation expenses.
46
Nitro Annual Report 2020
Executive remuneration statutory accounting method
The amounts shown in this table are prepared in accordance with AASB 124 Related party disclosures and do not represent actual
cash payment received by Executives for the year ended 31 December 2020. Amounts shown under long-term benefits reflect the
accounting expense recorded during the year with respect to prior year awards that have or are yet to vest. For performance payment
and awards made with respect to FY20 refer to the Performance Pay Outcomes section of the Report.
YEAR
SALARY
DIRECTOR FEES
STI CASH BONUS
OTHER
MONETARY
NON-MONETARY
BENEFITS
BENEFITS
TOTAL
2020
300,000
219,253
13,452
532,705
2019
300,000
184,586
18,000
11,676
514,262
2020
235,000
31,500
90,231
356,731
89,985
2019
2019
–
–
2020
80,769
43,680
300
–
–
89,985
124,749
–
8,027
88,796
2019
329,808
208,575
27,721
566,104
SHORT TERM
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Former Executives
Kathleen Miller3
2020
80,769
Sam Chandler
Kurt Johnson1
Ana Sirbu2
Richard Wenzel4
Total Executive
1. Appointed Executive Chair effective 1 April 2020 and ceased role of Independent Non-Executive Chair. Assumed CFO role in acting capacity for the period
1 April to 27 September 2020. Non-monetary benefits relate to travel and accommodation.
2. Commenced CFO role 28 September 2020.
3. Ceased CFO role effective 31 March 2020.
4. Assumed Non-Executive role effective post retirement as Executive Director and Senior Vice President of Tax and Treasury effective 1 April 2020.
Other monetary benefits relate to reimbursement of relocation expenses.
POST
EMPLOYMENT
BENEFITS
ANNUAL LEAVE
OPTIONS AND
RIGHTS
(TIME -BASED
VESTING)
LONG TERM
OPTIONS
AND RIGHTS
(PERFORMANCE
BASED)
TOTAL
SHARE-BASED
PAYMENTS
%
PERFORMANCE
RELATED
TOTAL
–
–
–
–
–
–
–
–
–
8,762
136,008
144,770
677,475
35,383
36,641
222,473
259,114
808,759
–
–
–
–
–
106,377
402,755
509,132
865,863
–
–
–
89,985
419,062
28,584
447,646
572,395
–
3,628
–
–
–
–
3,628
92,424
4,276
285,624
74,162
359,786
930,166
2020
62,308
30,000
82,212
5,301
179,821
2,850
182,671
2019
225,000
48,275
18,000
18,694
309,969
–
25,962
–
37,081
37,081
373,012
2020
758,846
61,500
262,933
82,512
117,011
1,282,802
2,850
–
537,829
567,347
1,105,176
2,390,828
52%
50%
47%
0%
13%
–
0%
30%
0%
23%
2019
854,808
89,985
441,436
36,000
58,091
1,480,320
–
65,621
322,265
333,716
655,981
2,201,922
–
47
Nitro Annual Report 2020
Remuneration Report (Audited)
5. Governance
The following diagram below represents the Group’s remuneration decision making framework:
Board
Review and approval
Nomination and Remuneration Committee
Group-wide remuneration framework and policy
Executive & NED remuneration outcomes
CEO
Recommendations on remuneration
outcomes for executive team
Management
Implementing remuneration policies
Remuneration Advisors
External independent remuneration
advice and information
The composition of the Nomination and Remuneration Committee is set out on pages 16 and 17 of this Annual Report. Further
information on the Committee’s role, responsibilities and membership can be viewed at https://ir.gonitro.com/investor-
centre/?page=corporate-governance.
The Nomination and Remuneration Committee operates independently from management, and may at its discretion appoint external
advisors or instruct management to prepare and provide information as an input to its decision making process.
During the year the Committee appointed Aon Advisory Australia Pty Ltd and Compensia Inc to provide remuneration advisory
services. Such services were provided to the Committee free from any undue influence by management.
ADVISOR
Aon Advisory Australia Pty Ltd
Aon Advisory Australia Pty Ltd
Aon Consulting Inc
Compensia Inc
DESCRIPTION OF SERVICES
Remuneration Advisory
Valuation Services
Benchmarking Data
Remuneration Advisory and Benchmarking Data
FEE (USD)
$20,799
$16,256
$14,130
$10,713
In additional to the characteristics already outlined, remuneration is also subject to the following:
• Board discretion to reduce, cancel or claw back any unvested STI or LTI in the event of serious misconduct or a material
misstatement in the Group’s financial statements; and
• A securities trading policy that applies to all Non-Executive Directors, Executives and any other persons designated by the Board
from time to time. This is set out at https://ir.gonitro.com/investor-centre/?page=corporate-governance.
48
Nitro Annual Report 2020 6. Non-Executive remuneration
Nitro’s Non-Executive Director (‘NED’) fee arrangements are structured and set by reference to the following key considerations:
• To attract and appropriately compensate suitably qualified directors, with experience and expertise appropriate to an international
technology Company;
• To reflect the time commitment expected in fulfilling their Board responsibilities and their contribution to Committees; and
• To acknowledge Australian market practice and governance expectations for comparable ASX listed companies.
The Nomination and Remuneration Committee will periodically review whether fees are appropriate having regard to information
provided by independent remuneration consultants.
NEDs receive fees and are not entitled to participate in any performance-based awards. NED fees consistent of base and committee
fees, with the payment of committee fees recognising the additional time commitment required by NEDs.
NEDs are engaged under a letter of appointment and are subject to ordinary election and rotation requirements as stipulated in the
ASX Listing Rules and Nitro’s constitution. NEDs are not entitled to any compensation on cessation of appointment. NEDs are paid
fees in the local currency of the Country in which they reside as indicated in their letter of appointment.
NEDs, where required and in accordance with the relevant legislation, are paid superannuation and pension related contributions
of the country in which they reside. The Group pays superannuation to Australian-based NEDs in accordance with Australian
superannuation guarantee legislation. NEDs do not receive a cash equivalent amount in lieu of superannuation.
NEDs are entitled to be reimbursed for all travel and related expenses reasonably incurred in performing their duties.
Additional remuneration may be paid if Non-Executive Directors are called upon to carry out duties or services that the Board
considers to be in addition to the ordinary duties of the office. These special duties may include serving on ad hoc projects or
transaction-focused committees.
For the year ended 31 December 2020, Directors’ fees were unchanged from 1 July 2019 prior to listing.
This Report is presented in the Company’s functional currency of USD. In limited instances where there have been translation of
balances relating to Non-Executive Director disclosure the exchange rates applied is AUD 1 = USD 0.685.
The table below details the fees payable to the Non-Executive Directors excluding superannuation and pension related contribution:
BASE FEES
Non-Executive Chairman
United States Non-Executive Director
Australian Non-Executive Directors
COMMITTEE FEES
Audit & Risk
Remuneration & Nomination
126,000
57,600
A$80,000
COMMITTEE
CHAIR
COMMITTEE
MEMBER
A$15,000
A$15,000
A$5,000
A$5,000
All paid committee chairs and members are currently based in Australia.
The actual total remuneration paid to the Nitro NEDs during FY20 is reported in the statutory remuneration table disclosed below
on page 50 of this Report.
With Kurt Johnson and Richard Wenzel having performed roles in both an Executive and Non-Executive Director capacity throughout
FY20 their statutory remuneration disclosure, including Non-Executive Director fees received for FY20 and FY19 have been included
in the Executive table on page 46 and 47 of the Annual Report.
49
Nitro Annual Report 2020
Remuneration Report (Audited)
Amounts paid to Non-Executive Directors
Michael Brown1
John Dyson1
Lisa Hennessy2
Sarah Morgan2
Former Non-Executive Director
Andrew Barlow3
Total
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
SHORT-TERM BENEFITS
POST EMPLOYMENT
SALARY AND
FEES
NON-MONETARY
BENEFITS
57,600
3,252
61,200
3,455
72,000
27,170
72,000
33,602
40,800
54,703
303,600
122,182
–
–
–
–
–
–
–
9,590
–
9,590
–
TOTAL
57,600
3,252
61,200
3,455
72,000
27,170
72,000
33,602
50,390
54,703
313,190
122,182
SUPER-
ANNUATION
–
–
–
–
6,840
748
6,840
748
3,876
2,693
17,556
4,189
TOTAL
57,600
3,252
61,200
3,455
78,840
27,918
78,840
34,350
54,266
57,396
330,746
126,371
1.
John Dyson and Michael Brown are Directors of Starfish Ventures and Battery Ventures, respectively, and fees payable for services are paid to the underlying
shareholder they represent.
2. Australian dollar equivalents for salary and fees aggregate $105,308, which is higher than the approved remuneration of A$100,000, but within the aggregate
fee pool.
3. Ceased role on 25 August 2020. Non-monetary benefits relate to reimbursement of legal fees.
Maximum aggregate fee pool
The current maximum aggregate fee pool is US$1,000,000. Denominating the fees and the fee pool in USD reflects the fact that
business operations are run from outside Australia. Shareholder approval will be sought if the aggregate amount needs to be
increased with the Board confirming it will not seek an increase at the 2021 AGM.
50
Nitro Annual Report 2020
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53
Nitro Annual Report 2020
Remuneration Report (Audited)
Executive option holdings – future vesting profile
EXECUTIVE
PLAN
YEAR
GRANT
AMOUNT
% VESTING
PREVIOUS
PERIODS
VESTING %
2020
%
INCENTIVE
AT RISK
VESTING %
2021
VESTING %
2022
VESTING %
2023
VESTING %
2024
Subject to performance hurdles and vesting
2019 LTI
2019
968,814
33%
17%
34%
conditions being met as detailed on page 42
of the Annual Report
2%
31%
33%
0%
25%
25%
0%
25%
24%
0%
19%
18%
Sam
Chandler
Historical
LTI
2016
1,586,421
83%
15%
2%
Ana Sirbu
ESOP
RSA
2020
2020
1,030,097
1,057,488
NA
NA
0%
0%
100%
100%
54
Nitro Annual Report 2020 Auditors’ Independence Declaration
55
PricewaterhouseCoopers, ABN 52 780 433 757 2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. Auditor’s Independence Declaration As lead auditor for the audit of Nitro Software Limited for the year ended 31 December 2020, I declare that to the best of my knowledge and belief, there have been: (a)no contraventions of the auditor independence requirements of the Corporations Act 2001 inrelation to the audit; and(b)no contraventions of any applicable code of professional conduct in relation to the audit.This declaration is in respect of Nitro Software Limited and the entities it controlled during the period.Niamh Hussey Melbourne Partner PricewaterhouseCoopers 24 February 2021 Nitro Annual Report 2020 Financial Statements
56
Nitro Annual Report 2020
Consolidated Statement
of Comprehensive Income
US$’000
Revenue
Cost of revenues
Gross profit
Sales and marketing
Research and development
General and administrative
Other income/(loss), net
Finance costs
Depreciation and amortisation expense
(Loss) before income tax
Income tax benefit/(expense)
(Loss) for the period
Other comprehensive income/(loss)
Item that may be reclassified to profit or loss
Adjustment from translation from foreign controlled entities
Total comprehensive (loss) for the period
Loss per share attributable to equity shareholders
Earnings per share
Basic loss per share (US$ per share)1
Diluted loss per share (US$ per share)1
NOTE
4, 5
6(a)
9
9
2020
40,196
(3,778)
36,418
(21,093)
(10,238)
(10,497)
(379)
(151)
(1,716)
(7,656)
116
(7,540)
339
(7,201)
(0.04)
(0.04)
2019
35,672
(3,650)
32,022
(19,064)
(7,284)
(10,652)
1,175
(1,761)
(2,013)
(7,577)
(354)
(7,931)
(169)
(8,100)
(0.11)
(0.11)
1. Basic and diluted earnings per share in the comparative period has been restated following the 9 for 1 share split undertaken on 18 November 2019.
57
Nitro Annual Report 2020
Consolidated Statement
of Financial Position
US$’000
ASSETS
Current assets
Cash and cash equivalents
Trade receivables
Current tax receivables
Other current assets
Total current assets
Non-current assets
Property, plant, and equipment
Intangible assets
Deferred tax assets
Right of use assets
Other non-current assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade payables
Deferred revenue
Lease liability
Employee benefits
Other current liabilities
Total current liabilities
Non-current liabilities
Deferred revenue
Deferred tax liability
Lease liability
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Other reserves
Accumulated losses
Total equity
58
NOTE
2020
2019
(AS ADJUSTED)
10
5(b), 11
11
13
8
11
5(b)
15
12
5(b)
8
15
14
43,749
47,017
6,659
75
2,864
4,755
91
1,908
53,347
53,771
507
1
32
1,808
4,263
6,611
564
64
189
3,058
3,034
6,909
59,958
60,680
3,077
21,037
1,097
2,877
848
2,772
16,409
1,393
2,090
707
28,936
23,371
1,152
–
572
1,724
30,660
29,298
90,343
5,012
(66,057)
29,298
2,028
344
1,540
3,912
27,283
33,397
90,209
1,705
(58,517)
33,397
Nitro Annual Report 2020
Consolidated Statement
of Changes in Equity
US$'000
CONTRIBUTED
EQUITY
TREASURY
RESERVE
WARRANT
RESERVE
EMPLOYEE
EQUITY
BENEFITS
RESERVE
FOREIGN
CURRENCY
TRANSLATION
RESERVE
ACCUMULATED
LOSSES
TOTAL
EQUITY
As at 1 January 2020
90,209
Loss for the period
Other comprehensive
income
Exchange differences
from translation of foreign
operations
Total comprehensive
loss for the year
Transactions with owners
of the Company
Share based payment
expense
Shares issued to employee
share trust
Cancellation of shares
Exercise of options
Repurchase of shares
Shares issued/allocated to
participants
Issuance costs on shares
–
–
–
–
–
–
–
–
–
6,083
(6,083)
–
261
(102)
(457)
(21)
(4)
–
–
457
–
76
–
4,548
–
(2,920)
(58,517)
33,397
–
(7,540)
(7,540)
–
–
–
–
–
–
–
–
–
–
–
2,968
–
–
–
–
–
–
339
–
339
339
(7,540)
(7,201)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,968
–
(4)
261
(102)
–
(21)
As at 31 December 2020
95,973
(5,630)
76
7,516
(2,581)
(66,057)
29,298
US$'000
CONTRIBUTED
EQUITY
TREASURY
RESERVE
WARRANT
RESERVE
As at 1 January 2019
42,555
Loss for the period
Other comprehensive income
Exchange differences
from translation of foreign
operations
Total comprehensive loss
for the period
Transactions with owners
of the Company
Shares issued on IPO
Shares issued to convertible
note holders
Employee share options
granted
Cancellation of shares
Exercise of options
Issuance costs on shares
As at 31 December 2019
–
–
–
44,833
6,199
–
(30)
319
(3,667)
90,209
EMPLOYEE
EQUITY
BENEFITS
RESERVE
FOREIGN
CURRENCY
TRANSLATION
RESERVE
(ACCUMULATED
LOSSES)
TOTAL
EQUITY
3,711
(2,751)
(50,586)
(6,995)
–
–
–
–
–
838
–
–
–
–
(7,931)
(7,931)
(169)
–
(169)
(169)
(7,931)
(8,100)
–
–
–
–
–
–
–
–
–
–
–
–
44,833
6,199
838
(30)
319
(3,667)
–
–
–
–
–
–
–
–
–
–
76
–
–
–
–
–
–
–
–
–
76
4,548
(2,920)
(58,517)
33,397
59
Nitro Annual Report 2020
Consolidated Statement
of Cash Flows
US$’000
Cash flows from operating activities
Loss for the year
Add back
Depreciation and amortisation
Share-based payments
Finance costs
Provision for doubtful debts
Asset write-offs
Net exchange differences
Change in operating assets and liabilities
(Increase)/decrease in trade and other receivables
(Increase)/decrease in deferred tax assets
(Increase)/decrease in tax receivable
(Increase)/decrease in other receivables
Increase/(decrease) in trade and other payables
Increase/(decrease) in deferred income
Increase/(decrease) in provision for income taxes
Increase/(decrease) in net deferred tax liability
Income taxes paid
Net cash inflow/(outflow) from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Premiums paid for currency derivatives
Receipt of loans from shareholders
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Proceeds from issue of convertible notes
Repayment of convertible notes
Proceeds from issue of preference shares
Proceeds from exercise of share options
Transaction costs related to issue of shares
Finance cost paid
Payment for leases
Purchase of shares by the employee share trust
Repayment of borrowings
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of movement in exchange rates on cash held
Cash and cash equivalents at the end of the year
60
2020
2019
(7,540)
(7,931)
1,716
2,968
151
36
7
268
2,013
838
1,761
–
–
(1,491)
(4,098)
(3,466)
(158)
(15)
4
1,469
3,752
20
(344)
–
(1,448)
(176)
(224)
–
(400)
–
–
(25)
–
444
(241)
(151)
(1,402)
(102)
–
(1,477)
(3,325)
47,017
57
43,749
(26)
12
348
1,556
6,475
24
344
(99)
358
(689)
–
31
(658)
44,833
5,000
–
1,750
121
(3,446)
(511)
(1,182)
–
(4,466)
42,099
41,799
4,049
1,169
47,017
Nitro Annual Report 2020
Notes to the
Financial Statements
1. General and corporate information
a. Reporting entity
Nitro Software Limited (‘Nitro’ or ‘the Company’) is a for-profit company incorporated and domiciled in Australia and limited by shares
publicly traded on the Australian Securities Exchange (‘ASX’) under the ASX code ‘NTO’.
The financial report covers the consolidated financial statements as at and for the year ended 31 December 2020 of Nitro and its
subsidiaries (together referred to as ‘the Group’).
The principal activity of the Group during the financial year was providing document productivity software, including PDF productivity,
eSigning workflow, and analytics solutions.
b. Authorisation for issue
These consolidated financial statements have been authorised for issue by a resolution of the Board of Directors on 24 February 2021.
2. Basis of preparation
a. Statement of compliance
The consolidated financial statements are general purpose financial statements which have been prepared in accordance with
Australian Accounting Standards (‘AASBs’) issued by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001.
The consolidated financial statements also comply with International Financial Reporting Standards (‘IFRS’) issued by the International
Accounting Standards Board (‘IASB’).
b. Principles of consolidation
Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Nitro Software Ltd (‘Company’ or
‘parent entity’) as at 31 December 2020 and the results of all subsidiaries for the year then ended.
Subsidiaries are all entities (including special purpose entities) over which the group has the power to govern the financial and
operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of
potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls
another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date
that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
The consolidated financial statements incorporate the assets, liabilities, and equity of the following subsidiaries in accordance with the
accounting policy described in this note.
NAME OF THE ENTITY
Nitro Software Inc
COUNTRY OF INCORPORATION
United States of America
Nitro Software EMEA Limited
Ireland
c. Going concern
EQUITY HOLDING
2020
100%
100%
2019
100%
100%
The consolidated financial statements have been prepared on a going concern basis, which assumes that the Group will be able
to continue its operations and pay its debts and obligations as and when they become due for payment. This assumption is based
on the Group’s projection of future cash outflow, cash inflows from operations and cash and cash equivalents as at the date of the
balance sheet.
61
Nitro Annual Report 2020 Notes to the Financial Statements
d. Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for share based payments which are
measured at fair value.
e. Functional and presentation currency
These consolidated financial statements are presented in United States Dollars (USD), the Company’s functional currency, consistent
with the predominant functional currency of the Group’s operations. The Group is referred according to ASIC Corporations (Rounding
in Financial/Directors’ Reports) Instrument 2016/191 and in accordance with that instrument, amounts in the consolidated financial
report and Directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated.
f. Foreign currency
Transactions related to the Group’s worldwide operations are conducted in a number of foreign currencies. The majority of the
subsidiaries have assessed USD as the functional currency, however, some subsidiaries, have functional currencies other than USD.
Transactions and monetary items denominated in foreign currencies are translated into USD as follows:
FOREIGN CURRENCY ITEM
Transactions
Monetary assets and liabilities
Non-monetary assets and liabilities
APPLICABLE EXCHANGE RATE
Date of the underlying transaction
Period-end rate
Date of the underlying transaction
Foreign exchange gains and losses resulting from translation are recognised in the income statement, except for qualifying cash flow
hedges (which are deferred to equity) and foreign exchange gains and losses that relate to borrowings which are presented in the
consolidated statement of comprehensive income within finance costs. All other foreign exchange gains and losses are presented in
the consolidated statement of comprehensive income on a net basis within other income or other expenses.
On consolidation, the assets, liabilities, income, and expenses of non-USD denominated functional currency entities are translated
into US dollars using the following applicable exchange rates:
FOREIGN CURRENCY AMOUNT
Income and expenses
Assets and liabilities
Equity and reserves
APPLICABLE EXCHANGE RATE
Date of the underlying transaction
Period-end rate
Historical rate
Foreign exchange differences resulting from translation are initially recognised in the foreign currency translation reserve and
subsequently transferred to the income statement on disposal of a foreign operation.
g. Use of judgements and estimates
In the preparation of these consolidated financial statements, the Group management has identified a number of critical accounting
policies under which significant judgements, estimates and assumptions are made. This can affect the application of accounting
policies and the reported amounts of assets, liabilities, income, and expenses.
Actual results may differ for these estimates under different assumptions and conditions. This may materially affect financial results
and the carrying amount of assets and liabilities to be reported in the next and future periods.
All judgements, estimates and underlying assumptions are based on most current facts and circumstances and are reassessed on an
ongoing basis. The effect of revisions to these estimates are recognised prospectively.
Accounting policies, and information about judgements, estimates and assumptions that have had a significant impact on the
amounts recognised in the consolidated financial statements are disclosed in the relevant notes as follows:
• Revenue recognition (Refer note 5); and
• Share-based payments (Refer note 7).
62
Nitro Annual Report 2020 COVID-19 pandemic
There has been no noticeable impact of the pandemic on the financial performance of the group. However, management has
considered the potential impact in performing the impairment assessments and the establishment of the expected credit loss on the
financial assets.
h. Significant accounting policies
Accounting policies are disclosed within each of the applicable notes to the consolidated financial statements to which these policies
relate. The Group’s accounting policies have been applied consistently to all periods presented in these consolidated financial
statements, and have been applied consistently by Group entities, except as detailed below:
•
In relation to unbilled receivables related to multi-year, non-cancellable subscription arrangements as explained in note 3; and
• To ensure consistency with the current period, comparative figures have been restated where appropriate.
i. New standards and interpretations
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning 1 January 2020,
which are as follows:
• AASB 2018-7 Amendments to Australian Accounting Standards – Definition of Material (AASB 101 and AASB 108);
• Revised Conceptual Framework for Financial Reporting and AASB 2019-1 Amendments to Australian Accounting Standards –
References to the Conceptual Framework; and
• AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform (AASB 7, AASB 9 and AASB 139).
The new standards effective from 1 January 2020 have no material impact on the Consolidated Financial Statements.
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2020 reporting
periods and have not been early adopted by the group. These standards are not expected to have a material impact in the current or
future reporting periods and on foreseeable future transactions.
3. Adjustment of prior period financial information:
Previously the Group had recognised unbilled receivables related to multi-year, non-cancellable subscription arrangements at
the contract inception. As practice has further developed since adoption of AASB 15 Revenue from Contracts with Customers, we
have revisited this policy and concluded that we will recognise the accounts receivable when the right to consideration becomes
unconditional. As such, the unbilled receivables and corresponding deferred revenue liabilities will no longer be recognised on the
balance sheet; Instead, they will be disclosed in the notes to our financial statements under remaining performance obligations.
The comparative information as at 31 December 2019 has been adjusted to reflect the impact of the above change. As at that date,
except as disclosed in the table below, the change does not have any impact on the statement of comprehensive income, the consolidated
statement of financial position, the consolidated statement of changes in equity, and the consolidated statement of cash flows.
US$’000
Trade receivables, non-current1
Other non-current assets1
Total non-current assets
Total assets
Deferred revenue, current
Total current liabilities
Deferred revenue, non-current
Total non-current liabilities
Total liabilities
31 DEC 2019
(AS PREVIOUSLY
REPORTED)
ADJUSTMENTS
31 DEC 2019
(AS ADJUSTED)
13,424
4,270
21,569
75,340
18,930
25,892
14,167
16,051
41,943
(13,424)
(1,236)
(14,660)
(14,660)
(2,521)
(2,521)
(12,139)
(12,139)
(14,660)
–
3,034
6,909
60,680
16,409
23,371
2,028
3,912
27,283
1. Comparative amounts have been reclassified to conform with current period presentation.
As at 1 January 2019, the impact of the adjustment to the consolidated balance sheet was a decrease in unbilled receivable of $12.4
million and a decrease in deferred revenue liabilities by the same amount.
63
Nitro Annual Report 2020 Notes to the Financial Statements
4. Segment information
The Group manages its operations as a single business operation and there are no separate parts of the Group that qualify as
operating segments. The CEO is the Chief Operating Decision Maker (‘CODM’) and assesses the financial performance of the Group on
an integrated basis as a single segment.
The CODM assesses the Group’s performance on a product/service perspective:
• Subscription – being the sale of software-as-a-service (‘SaaS’) to businesses providing access to the Nitro Productivity Suite, include
Nitro Pro and Nitro Sign software solutions; and
• Perpetual licence maintenance and support – being the sale of perpetual licence products (including optional maintenance and
support services).
US$’000
Revenue
Cost of revenues
Gross profit
Gross margin
SUSBCRIPTION
PERPETUAL
TOTAL
SUSBCRIPTION
PERPETUAL
2020
2019
21,250
(1,463)
19,787
93%
18,946
(2,315)
16,631
88%
40,196
(3,778)
36,418
91%
13,193
(1,172)
12,021
91%
22,479
(2,478)
20,001
89%
TOTAL
35,672
(3,650)
32,022
90%
5. Revenue and contract balances
a. Revenue
The Group’s revenue is derived from the sale of cloud-enabled software subscriptions, cloud-hosted offerings, term-based,
subscription and perpetual software licences, associated software maintenance and support plans, consulting services, training and
technical support.
Revenue from contracts with customers is disaggregated by the nature of product and services and timing of recognition which are
most reflective of the impact of the industry and economic environment in which the Group operates.
PRODUCT CHARACTERISTICS
US$’000
Subscription
Perpetual licences maintenance and support revenue
Total revenue
Subscription revenue as a % of total revenue
Perpetual licences maintenance and support revenue as a % of total revenue
TIMING OF REVENUE RECOGNITION
US$’000
Products and services transferred at a point in time
Products and services transferred over time
Total revenue
Revenue recognised at a point in time as a % of total revenue
Revenue recognised over time as a % of total revenue
2020
21,250
18,946
40,196
53%
47%
2020
13,355
26,841
40,196
33%
67%
2019
13,193
22,479
35,672
37%
63%
2019
15,003
20,669
35,672
42%
58%
64
Nitro Annual Report 2020
b. Receivables and contract liabilities
CONTRACT BALANCES
US$’000
ASSETS
Trade receivables, net
Capitalised contract acquisition costs
LIABILITIES
Deferred revenue
2020
2019
6,659
4,058
4,755
2,825
22,189
18,437
During the year ended 31 December 2020, approximately $16.4 million (31 December 2019: $15.7 million) of revenue was recognised
that was included in the opening balance of deferred revenue.
Please see Note 3 for the adjustment related to deferred revenue as at 31 December 2019 and the related changes to the remaining
performance obligations disclosure.
c. Transaction price allocated to remaining performance obligations
Remaining performance obligations represents total contractual commitments for which services will be performed. Remaining
performance obligations include deferred revenue, which primarily consists of billings or payments received in advance of revenue
recognition and unbilled receivable that have not yet been recognised in the financial statements. The transaction price allocated
to remaining performance obligations is approximately $46.7 million as of 31 December 2020. Approximately 53% of the remaining
performance obligations are expected to be recognised over the next 12 months with the remainder recognised thereafter.
TRANSACTION PRICE ALLOCATED TO
REMAINING PERFORMANCE OBLIGATIONS
FY2021
FY2022
FY2023
FY2024
FY2025
TOTAL
Subscription revenue
22,967
15,076
Maintenance and Support
Total
Accounting policy: Revenue
51 %
1,985
96%
34%
80
4%
24,953
15,156
53%
33%
6,529
15%
0
0%
6,529
14%
51
0%
–
0%
51
0%
13
0%
–
0%
13
0%
44,636
100%
2,065
100%
46,701
100%
Revenue is recognised when a contract exists between the Group and a customer and upon transfer of control of products or
services to customers in an amount that reflects the consideration the Group expects to receive in exchange for those products
or services.
We enter into contracts that can include various combinations of products and services, which may be capable of being distinct and
accounted for as separate performance obligations, or in the case of offerings such as cloud-enabled subscription licences, accounted
for as a single performance obligation. Revenue is recognised net of allowances for returns and any taxes collected from customers,
which are subsequently remitted to governmental authorities.
The following table provides information about the nature and timing of the satisfaction of performance obligations in contracts with
customers, including significant payment terms and related revenue recognition policies.
65
Nitro Annual Report 2020
REVENUE RECOGNITION POLICIES
Revenue from the Company’s
subscription services is recognised
over time on a straight-line basis over
the contract term beginning on the
date that the Company’s application
suite or product is made available to
the customer.
In relation to automatic renewals,
revenue is recognised over time on
a straight-line basis based on the
amount the Company expects to
receive in relation to these services.
Notes to the Financial Statements
TYPE OF PRODUCT
OR SERVICE
NATURE AND TIMING OF SATISFACTION OF THE PERFORMANCE
OBLIGATIONS, INCLUDING SIGNIFICANT PAYMENT TERMS
Subscription
agreements for
• Fully hosted
subscription services
(SaaS)
• On-device or
•
In relation to on device or desktop software, customers
obtain control of the software upon delivery of the software
licence key and their acceptance or when the acceptance
provisions have lapsed.
•
In relation to SaaS, customers are granted access to the
software, without taking possession of the software.
desktop software
• Support and maintenance arrangements are built into all
subscription agreements.
• Subscription periods are typically entered into for 36 months,
but can also be entered into for 12 and 24 months, and are
billed annually in advance.
• All contracts have automatic renewal for a period of 12 months
unless otherwise notified in writing prior to expiration of the
contract term.
• Subscription services represent a single obligation to provide
continuous access to the software, maintenance and support
including upgrades on an “if and when available” basis.
• As each day of providing access to the software is
substantially the same and the customer simultaneously
receives and consumes the benefit as access is provided,
the Group has determined that its subscriptions services
arrangement include a single performance obligation
comprised of a series of distinct services.
• Customers are able to generate new user licence keys for
additional users after initial delivery of the initial software
licence key through issuance of an order. This is treated as
an amendment to the contract and invoiced accordingly.
Sale of perpetual
licences for on-device
or desktop software
• Customers obtain control of the software upon delivery of
the software licence key and their acceptance or when the
acceptance provisions have lapsed.
• The delivery of the software licence key is contingent upon
payment by the customer in advance.
Revenue from perpetual licences is
recognised at the point in time the
software is available to the customer,
provided all other revenue recognition
criteria are met.
• Some contracts include maintenance and support of
the product, the pricing for which is distinct and detailed
separately from the price of the software licence.
The maintenance and support agreements are generally for a
12-month period.
Revenue from maintenance and
support contracts is recognised on a
straight-line basis over the support
term as the underlying service is a
stand-ready performance obligation.
• Customers are able to generate new user licence keys for
additional users after initial delivery of the initial software
licence key through issuance of an order. This is treated as an
amendment to the contract and invoiced accordingly.
66
Nitro Annual Report 2020 Accounting policy: Trade receivables
A receivable is recorded when an unconditional right to invoice and receive payment exists, such that only the passage of time is
required before payment of consideration is due. Timing of revenue recognition may differ from the timing of invoicing to customers.
Certain performance obligations may require payment before delivery of the licence or service to the customer.
Accounting policy: Contract assets
A contract asset is recognised when an unconditional right to consideration exists and transfer of control has occurred. Contract
assets are typically related to subscription and maintenance and support contracts where the transaction price allocated to the
satisfied performance obligations exceeds the value of billings to date.
Accounting policy: Contract liabilities
Contract liabilities represents deferred revenue, which primarily consists of billings or payments received in advance of revenue
recognition from subscription services, including non-cancellable and non-refundable committed funds and deposits. Deferred
revenue is recognised as revenue when transfer of control to customers has occurred. Customers are typically invoiced for these
agreements in regular instalments and revenue is recognised on a straight-line basis over the contractual subscription period.
The deferred revenue balance is influenced by several factors, including seasonality, the compounding effects of renewals, invoice
duration, invoice timing, size and new business trajectory within the quarter. Deferred revenue does not represent the total contract
value of annual or multi-year non-cancellable subscription agreements.
Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days.
In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally
do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified
and predictable ways of purchasing our products and services, such as invoicing at the beginning of a subscription term with revenue
recognised on a straight-line basis over the contract period, and not to receive financing from our customers. Any potential financing
fees are considered insignificant in the context of our contracts.
Significant movements in the deferred revenue balance during the period consisted of increases due to payments received prior
to transfer of control of the underlying performance obligations to the customer, which were offset by decreases due to revenue
recognised in the period.
Transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognised,
which includes deferred revenue and unbilled amounts that will be recognised as revenue in future periods.
Accounting policy: Contract costs
The Group recognises an asset for the incremental costs of obtaining a contract with a customer if the Group expects the benefit of
those costs to be longer than one year. The Group has determined that certain sales incentive programs meet the requirements to
be capitalised.
The costs capitalised under the AASB 15 include sales commissions paid to our sales force personnel and channel partners, resellers
and third parties. Capitalised costs may also include portions of fringe benefits and payroll taxes associated with compensation
for incremental costs to acquire customer contracts and incentive payments to partners. Capitalised costs to obtain a contract are
amortised over the expected period of benefit, which is determined, based on the Group’s analysis, to be three years. Contract
costs in relation to payments to resellers and channel partners are amortised over the length of the contract. The Group evaluated
qualitative and quantitative factors to determine the period of amortisation, including contract length, renewals, customer life and
the useful lives of our products. When the expected period of benefit of an asset which would be capitalised is less than one year, the
Group expenses the amount as incurred. These expenses and amortisation of capitalised contract cost are classified under sales and
marketing expense in the consolidated statement of comprehensive income. The group regularly evaluate whether there have been
changes in the underlying assumptions and data used to determine the amortisation period.
67
Nitro Annual Report 2020 Notes to the Financial Statements
6. Other income and expenses
a. Other income
OTHER INCOME/(EXPENSE)
US$’000
Foreign exchange gains/(losses), net
Interest income
Other income/(loss)
Total other income/(expense)
2020
(521)
155
(13)
(379)
2019
1,135
40
–
1,175
Income is recognised as the interest accrues (using the effective interest method), which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset.
b. Expenses
OTHER INCOME/(EXPENSE)
US$’000
Wages and salaries
Superannuation
Share-based payments
Employee benefit expenses
Accounting policy
Share-based payments
2020
25,926
117
2,968
29,011
2019
21,194
78
837
22,109
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity
instruments at the grant date. The fair value determined at the grant date of the equity-settled share-based payments is expensed
on a straight-line basis over the vesting period, based on the group’s estimate of equity instruments that will eventually vest, with
a corresponding increase in equity. At the end of each reporting period, the group revises its estimate of the number of equity
instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the
cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.
Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or
services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the
equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.
For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the fair value
of the liability. At the end of each reporting period until the liability is settled, and at the date of settlement, the fair value of the liability
is remeasured, with any changes in fair value recognised in profit or loss for the year.
7. Share-based payments
Awards, in the form of the right to receive ordinary shares in the Company, have been granted under the following employee share
ownership plans in the Historical Long-Term Incentive Plan (‘Historical LTIP’) and Current Long-Term Incentive Plan (‘Current LTIP’)
Awards. Set out below are the details of the awards under the Current LTIP for the year ended 31 December 2020.
a. Share options
Stock options granted to employees generally vest over a four-year period and expire ten years from the date of grant. Certain awards
provide for accelerated vesting upon a change of control. Stock options are generally granted with exercise prices equal to the fair
market value of its common stock on the date of grant. During the year, 5,854,718 unlisted options were issued to eligible employees.
Of the same, 1,030,097 options were issued to KMP of the Group. The following table summarises the movements in the number of
options outstanding as at 31 December 2020.
68
Nitro Annual Report 2020 OPTIONS
2020
NO.
WAEP1
2019
NO.
Outstanding at the beginning of the period
15,873,129
0.5500
17,375,229
Granted during the period
Forfeited during the period
Exercised during the period
5,854,718
1.9327
5,129,190
(2,002,562)
0.7373
(5,308,164)
(1,128,458)
0.4956
(1,323,126)
Outstanding at the end of the period
18,596,827
0.9482
15,873,129
Exercisable at the end of the period
11,670,617
0.4238
11,366,931
Weighted average remaining contractual life in years
5.83
5.79
WAEP1
0.3800
1.0100
0.5100
0.3300
0.5500
0.4100
1. Weighted average exercise price in Australian dollars.
Estimation of fair value
The Company estimates the fair value of the options on the date of grant using the Black-Scholes option-pricing model or the
Monte Carlo model for relative Total Shareholder Return (‘rTSR’) vesting performance grants. These models require the use of highly
subjective estimates and assumptions, including expected volatility, expected term, risk-free interest rate, and expected dividend yield.
The above inputs used in the measurement of share-based payments expense include Level 1 and Level 2 inputs as per the fair value
hierarchy under AASB 13 Fair value measurements:
• Such as quoted prices (unadjusted) in active markets; and
•
Inputs other than quoted prices included within level 1 that are observable either directly (as prices) or indirectly (derived from
prices), respectively.
The fair value of options granted during the year ended 31 December 2020 and year ended 31 December 2019 were estimated on
the grant date using the assumptions set out below.
ASSUMPTIONS
Date of grant
Date of Expiry
Exercise price
Fair value at grant date
Expected price volatility %
Dividend yield %
Risk free rate
Remaining contractual life (years)
b. Performance rights
27 Mar 20
27 Mar 30
2020
24 Jun 20
24 Jun 30
2019
23 Sep 20
23 Sep 30
25 Mar 19
24 Mar 29
13 Nov 19
11 Dec 29
AUD 0.9750
AUD 1.4700
AUD 2.4900
USD 0.3856
AUD 1.7200
AUD 0.5400
AUD 0.8000
AUD 1.3300
USD 0.2100
AUD 0.6900
62%
0%
0.56%
9.24
62%
0%
0.53%
9.49
55.60%
0%
0.45%
9.73
60%
0%
1%
9.24
42%
0%
1%
9.96
The Company recognises share-based payment expense over the vesting term of the performance rights. The fair value is measured
based upon the number of units and the closing price of the Company’s shares on the date of the grant. Detailed terms and
conditions are included in the Remuneration Report on page 40 of the Annual Report.
Market-based vesting conditions
During the period, 1,576,225 performance rights with market-based vesting conditions were issued to the senior executives of the
Group. In addition to the requisite service period, these restricted shares contain a market-based vesting condition based on relative
total shareholder return.
69
Nitro Annual Report 2020
Notes to the Financial Statements
Relative total shareholder return is defined as increases in our stock price during the performance period as compared to the
Company’s peer group, ASX All Technology Index (ASX: XTX), expressed as a percentile ranking to be assessed at the end of the
performance periods of two and three years.
The probability of the actual shares expected to be awarded is considered in the grant date valuation.
Performance-based vesting conditions
During the period, 630,229 performance rights with performance-based vesting conditions were issued to the senior executives of the
Group. In addition to the requisite service period, these stock units contain a performance-based vesting conditions based on internal
compound revenue growth rate measure (‘CAGR’). The probability of the actual shares expected to be awarded is not considered in
the grant date valuation. The share-based payment expense will be adjusted over the vesting period, as further information becomes
available to reflect the actual shares awarded.
The following table summarises the movements in the number of restricted shares outstanding as at 31 December 2020.
Outstanding at the beginning of the period
Granted during the period
Forfeited during the period
Vested during the period
PERFORMANCE RIGHTS
2020
2019
WAFV1
NO.
WAFV1
NO.
–
2,206,454
1.5515
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Outstanding at the end of the period
2,206,454
1.5515
1. Weighted average fair value in Australian dollars.
Estimation of fair value
The Company estimates the fair value the performance rights using the Monte Carlo model for relative Total Shareholder Return
(‘rTSR’) vesting grants. These models require the use of highly subjective estimates and assumptions, including expected volatility,
expected term, risk-free interest rate, and expected dividend yield.
The fair value of performance rights granted during the year ended 31 December 2020 were estimated on the grant date using the
assumptions set out below:
ASSUMPTIONS
Date of grant
Date of vesting
Share price on grant date
Exercise price
Expected price volatility %
Dividend yield %
Risk free rate
Remaining contractual life (years)
Fair value at grant date
2020
2019
29 May 20
29 May 20
31 Dec 21
31 Dec 22
AUD 1.60
AUD 0.00
69.09%
0%
0.26%
1
AUD 1.60
AUD 0.00
61.69%
0%
0.27%
2
23 Sep 20
31 Dec 22
AUD 2.56
AUD 0.00
65.38%
0%
0.17%
2
AUD 1.14
AUD 1.20
AUD 2.19
–
–
–
–
–
–
–
–
–
70
Nitro Annual Report 2020
c. Share awards
In 2020, the Company issued 2,805,644 shares to the senior executive of the Group of which 1,157,488 were issued to KMP at an
exercise price of Nil. Detailed terms and conditions are included in the Remuneration Report on page 36 and 37 of the Annual Report.
These awards generally vest over a period of one to four years. The fair value was measured based upon the closing price of the
Company’s shares on the date of the award. During the year ended 31 December 2020, the Company recognised share-based
payment expense of $1.05 million related to the share award. The following table summarises the movements in the awards granted
including the weighted average fair values.
Outstanding at the beginning of the period
Granted during the period
Forfeited during the period
Vested during the period
Outstanding at the end of the period
1. Weighted average fair value of the award in Australian dollars.
RESTRICTED SHARE AWARDS
2020
2019
WAFV1
NO.
WAFV1
2.53
–
1.60
2.56
–
–
–
–
–
–
–
–
–
–
NO.
–
2,805,644
–
(100,000)
2,705,644
The fair value of the share awards on measurement date is based on the closing market price on the day preceding the grant.
e. Expense summary
For the year ended 31 December 2020, the Group recognised $2.97 million of share-based payment expense in relation to the stock
options, performance rights and share awards.
8. Taxes
a. Income tax
The income tax expense or credit for the year is the tax payable on the current year’s taxable income based on the applicable income
tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to
unused tax losses.
b. Current tax
Current tax is the expected tax payable on the taxable income for the financial year, using applicable tax rates (and tax laws) at
the balance sheet date in each jurisdiction, and any adjustment to tax payable in respect of previous financial years. The Group
periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
c. Deferred tax
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated financial statements. The following temporary differences are not
provided for:
• The initial recognition of goodwill; and
• The initial recognition of assets or liabilities that affect neither accounting nor taxable profit.
71
Nitro Annual Report 2020
Notes to the Financial Statements
d. Measurement, recognition and presentation
Measurement of deferred tax is based on the expected manner of realisation or settlement of the carrying amount of assets and
liabilities using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are
expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of
investments in foreign operations where the company is able to control the timing of the reversal of the temporary differences and it
is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and
when the deferred tax balances relate to the same taxation authority.
Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle
on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax is recognised in profit or loss,
except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also
recognised in other comprehensive income or directly in equity, respectively.
INCOME TAX EXPENSE
US$’000
Current tax expense
Deferred tax expense
Income tax (benefit)/expense
NUMERICAL RECONCILIATION OF INCOME TAX EXPENSE TO PRIMA FACIE TAX PAYABLE
US$’000
Loss before income tax
Tax at the Australian Tax rate of 30% (31 December 2019: 30%)
Tax effect of amounts which are not deductible in calculating taxable income
Other (deductible)/non-deductible expenses
Tax credits
Transaction costs on issues of shares
Finance costs in relation to convertible note
Effect of lower tax rates in USA, Ireland and UK
Current year losses for which no deferred tax is recognised
2020
70
(186)
(116)
2020
(7,656)
2,297
1,234
(114)
–
–
(306)
(2,995)
116
2019
36
318
354
2019
(7,577)
2,273
(97)
–
(888)
(375)
252
(1,520)
(354)
The Group has unused tax losses of $71.49 million (31 December 2019: $58.74 million), which has not been recognised as a deferred
tax asset. The unused tax losses were incurred by the Group’s United States and Australian operations and is not likely to generate
taxable income in the foreseeable future. The Group is currently undertaking an assessment of the eligibility to carry forward these
losses in the future.
72
Nitro Annual Report 2020
DEFERRED TAX
2020
Deferred tax asset/(liability)
Share issue expenses
Provisions and accruals
Movements in currency exchange rates
Property, plant and equipment
Intangibles
Net deferred tax asset/(liability)
Deferred tax asset
Deferred tax liability
DEFERRED TAX
2019
Deferred tax asset/(liability)
Share issue expenses
Provisions and accruals
Movements in currency exchange rates
Property, plant and equipment
Intangibles
Net deferred tax asset/(liability)
Deferred tax asset
Deferred tax liability
BALANCE AT
1 JANUARY 2020
US$’000
RECOGNISED
IN THE INCOME
STATEMENT
US$’000
RECOGNISED
IN EQUITY
US$’000
BALANCE AT
31 DECEMBER
2020
US$’000
11
147
(343)
(24)
55
(155)
189
344
(11)
(106)
343
24
(65)
186
–
–
–
–
–
–
–
–
–
–
–
41
–
–
(9)
32
32
–
BALANCE AT
1 JANUARY 2019
US$’000
RECOGNISED
IN THE INCOME
STATEMENT
US$’000
RECOGNISED
IN EQUITY
US$’000
BALANCE AT
31 DECEMBER
2019
US$’000
42
63
4
55
–
163
163
–
(31)
84
(347)
(79)
55
(318)
–
–
–
–
–
–
–
–
–
–
11
147
(343)
(24)
55
(155)
189
344
73
Nitro Annual Report 2020
Notes to the Financial Statements
9. Earnings per share
Basic earnings per share (‘EPS’) is determined by dividing profit/(loss) after tax attributable to members of the Company and Group,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted EPS is determined by adjusting the profit/(loss) after tax attributable to members of the Company and Group, and the
weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares. Dilution occurs
when employee share options are included in outstanding shares.
US$’000
Net loss attributable to ordinary equity holders
Net loss used in calculating diluted earnings per share
2020
(7,540)
(7,540)
2019
(7,931)
(7,931)
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES ON ISSUE USED IN THE CALCULATION OF
2020
2019
Basic earnings per share
Diluted earnings per share
EARNINGS PER SHARE US$
Basic
Diluted
189,185,817
73,133,789
189,185,817
73,133,789
2020
(0.04)
(0.04)
2019
(0.11)
(0.11)
For the year ended 31 December 2020, the Group’s only potential dilutive ordinary shares are share awards granted under the
employee share ownership plans. Diluted earnings per share calculation excludes instruments which are considered anti-dilutive.
For the year ended year ended 31 December 2020, the effect of these shares was not included in the calculation of diluted earnings
per share because they are anti-dilutive for the period(s) presented.
10. Cash and cash equivalents
CASH AND CASH EQUIVALENTS
US$’000
Bank balances
2020
43,749
2019
47,017
The Group held cash and cash equivalents with banks and financial institution counterparties which are rated, BBB- to AA-, based on
Standards & Poor’s ratings.
11. Trade and other receivables
TRADE AND OTHER RECEIVABLES
US$’000
Trade receivables, net
Contract acquisition costs, net
Prepayments
Other receivables due from related parties
Others
Trade and other receivables
Current
Non-current
74
2020
6,659
4,058
1,839
–
1,229
13,785
9,522
4,263
2019
4,755
2,825
1,324
120
673
9,697
6,663
3,034
Nitro Annual Report 2020
Accounting policy
Trade receivables
A receivable is recorded when an unconditional right to invoice and receive payment exists, such that only the passage of time is
required before payment of consideration is due. Timing of revenue recognition may differ from the timing of invoicing to customers.
Certain performance obligations may require payment before delivery of the licence or service to the customer.
LOSS ALLOWANCE
US$’000
Loss allowance at the beginning of the year
(Reversal)/provision for loss allowance
Write-offs
Recovery of balances written off
Loss allowance at the end of the year
Loss allowance
2020
2019
25
36
(31)
–
30
87
(41)
(30)
9
25
The Group has two types of financial assets that are subject to AASB 9’s expected credit loss model, which are trade receivables
and contract assets. The Group applies the AASB 9 simplified approach to measuring expected credit losses, which uses a lifetime
expected loss allowance for all trade receivables and contract assets. Loss allowances in previous periods have not been material.
Historical loss rates have been adjusted to reflect current and forward-looking information on factors impacting the ability of the
customers to settle the outstanding debt.
Quality of receivables and loss allowance
To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk
characteristics and the days past due. The contract assets relate to work contracted greater than 12 months and have substantially
the same risk characteristics as the trade receivables for the same types of contracts. The Group has therefore concluded that the
expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets.
The expected loss rates are based on the payment profiles of sales over a period of 36 month before 31 December 2018 or 1 January
2019, respectively, and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted
to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the
receivables and accordingly adjusts the historical loss rates based on expected changes in these factors.
TRADE RECEIVABLES
US$’000
Current
0 to 30 days overdue
31 to 60 days overdue
61 to 90 days overdue
More than 90 days
overdue
AMOUNT
5,651
845
150
43
–
2020
LOSS
ALLOWANCE
RATE
AMOUNT
2019
LOSS
ALLOWANCE
0.43%
0.57%
0.25%
1.80%
24
5
0
1
–
3,732
778
121
124
–
20
4
0
1
–
25
Total
6,689
30
0.45%
4,755
RATE
0.54%
0.52%
0.26%
0.52%
0.53%
75
Nitro Annual Report 2020
Notes to the Financial Statements
12. Employee benefits
EMPLOYEE BENEFIT LIABILITIES
US$’000
Accrued wages
Annual leave
Long service leave
2020
2,302
567
8
2,877
2019
1,493
593
4
2,090
Short-term and other long-term employee benefit obligations
Liabilities for annual leave and any accumulating sick leave accrued up until the reporting date that are expected to be settled within
12 months are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for long service leave are
measured as the present value of estimated future payments for the services provided by employees up to the reporting date and
disclosed within employee benefits. Liabilities that are not expected to be settled within 12 months are not discounted as the impact
of the same is immaterial. Liabilities for unpaid wages and salaries are recognised in trade and other payables.
13. Property, plant and equipment
RECONCILIATION OF CARRYING AMOUNTS 2020
US$’000
Carrying value at the beginning of the year
Additions
Amortisation
Disposals
FX adjustments
Carrying value at the end of the year
AS AT 31 DECEMBER 2020
Cost
Accumulated depreciation
Carrying value at the end of the year
RECONCILIATION OF CARRYING AMOUNTS 2019
US$’000
Carrying value at the beginning of the year
Additions
Amortisation
Disposals
FX adjustments
Carrying value at the end of the year
AS AT 31 DECEMBER 2019
Cost
Accumulated depreciation
Carrying value at the end of the year
76
PLANT AND
EQUIPMENT
FURNITURE,
FITTINGS AND
EQUIPMENT
LEASEHOLD
IMPROVEMENTS
125
159
(79)
154
(146)
213
602
(389)
213
30
–
(14)
–
–
16
143
(127)
16
409
17
(167)
7
12
278
611
(333)
278
PLANT AND
EQUIPMENT
FURNITURE,
FITTINGS AND
EQUIPMENT
LEASEHOLD
IMPROVEMENTS
4
150
(29)
–
–
125
595
(470)
125
18
25
(13)
–
–
30
154
(124)
306
19
514
(123)
–
(1)
409
569
(160)
409
TOTAL
564
176
(260)
161
(134)
507
1,356
(849)
507
TOTAL
41
689
(165)
–
(1)
564
1,318
(754)
564
Nitro Annual Report 2020
Accounting policy: Property, plant and equipment
Each class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated
depreciation and impairment losses.
Plant and equipment are measured on the cost basis and are therefore carried at cost less accumulated depreciation and any
accumulated impairment losses. In the event the carrying amount of plant and equipment is greater than its estimated recoverable
amount, the carrying amount is written down immediately to its estimated recoverable amount and impairment losses are recognised
either in profit or loss as a revaluation decrease if the impairment losses relate to a revalued asset. A formal assessment of recoverable
amount is made when impairment indicators are present. Subsequent costs are included in the asset’s carrying amount or recognised
as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the
Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset
is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which
they are incurred. Depreciation of furniture and fixtures and computer equipment is measured using the straight-line method over
estimated useful lives of the assets, generally three to five years. Leasehold improvements are amortised over the lesser of the
estimated useful life of the asset or the remaining lease term. The depreciation rates used for each class of depreciable assets are:
• Leasehold improvements
• Furniture and fittings
• Office equipment
20%
33%
33%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s
carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included
in profit or loss. When revalued assets are sold, it is Group policy to transfer any amounts included in other reserves in respect of
those assets to retained earnings.
Accounting policy: Impairment of assets
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more
frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the
amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair
value less costs of disposal and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets
(cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the
impairment at the end of each reporting period.
Accounting policy: Software development costs
Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible
assets when it is probable that the project will, after considering its commercial and technical feasibility, be completed and generate
future economic benefits and its costs can be measured reliably. The expenditure capitalised comprises all directly attributable costs,
including costs of materials, services, direct labour and an appropriate proportion of overheads. Other development expenditures
that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense
are not recognised as an asset in a subsequent period. Capitalised development costs are recorded as intangible assets and
amortised from the point at which the asset is ready for use on a straight-line basis over its useful life, which varies from 3 to 5 years.
The amortisation rates used for each class of intangible assets are:
•
Intellectual property 20%
• Software33% – 40%
• Capitalised software 50%
• Domains 33%
Software development costs include costs directly attributable to the development phase and are only recognised following
completion of technical feasibility and where the Group has an intention and ability to use the asset.
77
Nitro Annual Report 2020
Notes to the Financial Statements
14. Equity shares
EQUITY SECURITIES
2020
2019
NO.
US$’000
NO.
US$’000
Balance at the beginning of the year
188,928,996
90,209
66,045,285
Exercise of options and warrants
Shares issued to the employee share trust
Shares acquired by the employee share trust
Shares allocated to participants from the employee share
trust
1,149,824
3,705,644
(611,242)
Shares withheld in relation to cashless exercise of options
(114,700)
Issue of shares on IPO
Conversion of preference shares to ordinary shares
Issue of shares on conversion of notes
Expenses directly attributable to the issue of shares
–
–
–
–
261
6,083
(102)
(457)
–
–
–
–
1,456,854
–
–
–
–
38,249,649
77,872,509
5,304,699
(21)
–
Balance at the end of the year including treasury shares
193,058,522
95,973
188,928,996
Treasury shares unallocated
(3,103,965)
(5,630)
–
628
289
–
–
–
–
44,833
41,927
6,199
(3,667)
90,209
–
Balance at the end of the year excluding treasury shares
189,954,557
90,343
188,928,996
90,209
a. Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the
number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person
or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par value and the
company does not have a limited amount of authorised capital.
b. Preference shares
Series A, B, C and D Preference shares are entitled to receive any dividend declared by the Board as it they are equal to the number of
Ordinary Shares which may be issued upon their conversion into Ordinary Shares. The preference shares were converted to ordinary
shares prior to the completion of the IPO.
c. Options
As at 31 December 2020 there were 18,596,827 vested and unvested options on issue, and as at 31 December 2019: 15,873,129)
vested and unvested options on issue (refer note 7 for details). These have been adjusted for the 9:1 stock split on 18 November 2019.
d. Reserves
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial
statements of foreign subsidiaries.
The employee share benefits reserve is used to record the value of share-based payments provided to employees, including KMP as
part of their remuneration.
The warrants reserve is used to record the value of warrants issued to third parties against the shares of the company.
The treasury reserve is used to hold the book value of shares held by the Employee Share Trust for future issue to participants on
exercise of options, performance rights and share awards.
78
Nitro Annual Report 2020
Treasury shares
During the year ended 31 December 2020, the Group established an Employee Share Trust (‘Trust’) for the purpose of issuance of
shares to participants on exercise of options/settlement of performance rights.
The balance in Treasury Reserve as at 31 December 2020 represents book value of 3,103,965 shares held by the Trust for future issue to
participants on exercise of options/settlement of performance rights. The movement of treasury shares is as follows:
Balance at the beginning of the year
Issue of shares to the employee share trust
Shares allocated to participants from the employee
share trust
Forfeited shares bought back
Balance at the end of the year
NO.
–
3,705,644
(611,242)
9,563
3,103,965
15. Leases and Right to use assets
RECONCILIATION OF CARRYING AMOUNTS OF RIGHT OF USE ASSETS
US$’000
Carrying value at the beginning of the year
Additions
Amortisation
FX adjustments
Carrying value at the end of the year
US$’000
Cost
Accumulated depreciation
Carrying value at the end of the year
LEASE LIABILITIES – MATURITY ANALYSIS
US$’000
Contractual undiscounted cashflows
Less than one year
One to five years
Total undiscounted lease liabilities as at the end of the year
Lease liabilities included in the statement of financial position
Current
Non-current
TREASURY SHARES
2020
2019
US$’000
NO.
US$’000
–
6,083
(457)
4
5,630
–
–
–
–
–
2020
3,058
–
(1,393)
143
1,808
2020
4,314
(2,506)
1,808
–
–
–
–
–
2019
–
4,105
(1,003)
(44)
3,058
2019
4,064
(1,006)
3,058
2020
2019
1,204
536
1,740
1,669
1,097
572
1,513
1,621
3,134
2,933
1,393
1,540
79
Nitro Annual Report 2020
Notes to the Financial Statements
AMOUNTS RECOGNISED IN PROFIT OR LOSS
US$’000
Interest on lease liabilities
Expenses relating to short-term leases
Expenses relating to leases of low value assets, excluding short-term leases of low value assets
AMOUNTS RECOGNISED IN THE STATEMENT OF CASH FLOWS
US$’000
Total cash outflow for leases
Accounting policy
2020
140
81
–
2020
1,402
2019
164
359
8
2019
1,182
At inception of a contract, the Group assess whether the contract is, or contains, a lease. A contract is, or contains, a lease if
the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. At the
commencement or modification of a contract that contains a lease, the Group allocates the consideration in the contract to each
lease component on the basis of its relative stand-alone prices. However, for leases of property, the Group has elected not to
separate non-lease components and account for the lease and non-lease components as a single lease component.
Leases are recognised as right-of-use assets and a corresponding liability at the date at which the leased asset is available for use
by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit and loss
over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Assets and
liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the
following lease payments:
• Fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• Variable lease payments that are based on an index or a rate;
• Amounts expected to be payable because the lease is reasonably certain to exercise that option; and
• Payments of penalties for terminating the lease, if the lease term reflects the lease exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s
incremental borrowing rate is used, being the rate that the lease would have to pay to borrow the funds necessary to obtain an asset
or similar value in a similar economic environment with similar terms and conditions.
Right of use assets are measured at cost comprising the following:
• The amount of the initial measurement of lease liability;
• Any lease payments made at or above the commencement date less any lease incentives received;
• Any initial direct costs; and
• Restoration costs.
80
Nitro Annual Report 2020 Reconciliation of movements of liabilities to cash flows arising from financing activities
USD'000
LEASE LIABILITIES
LEASE LIABILITIES
BANK LOANS
CONVERTIBLE
NOTES
2020
2019
Balance as at the beginning of the year
Proceeds from issue of convertible notes
Payment for leases
Repayment of borrowings
Changes from financing cash flows
Effect of changes in
foreign exchange rates
Other changes
Finance costs
Finance costs paid
Conversion to ordinary shares
Other (payables)/receivables
New leases
Subtotal other changes
2,933
–
(1,402)
–
(1,402)
138
140
(140)
–
–
–
–
Balance at the end of the year
1,669
16. Financial risk management
a. Risk management framework
–
–
(1,182)
–
(1,182)
26
164
(164)
–
–
4,089
4,089
2,933
4,442
–
–
(4,442)
(4,442)
339
(339)
–
–
–
–
–
–
5,000
–
(24)
4,976
1,250
–
(6,199)
(27)
–
(4,976)
–
TOTAL
4,442
5,000
(1,182)
(4,466)
(648)
26
1,753
(503)
(6,199)
(27)
4,089
(887)
2,933
The Company’s Board of Directors have an overall responsibility for the establishment and oversight of the Group’s risk management
framework. The Board of Directors has established the Audit and Risk Management Committee, which is responsible for developing
and monitoring the Group’s risk management policies. The Group’s risk management policies are established to identify and
analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits.
Risk management policies are reviewed regularly to reflect changes in the market environment and the Group’s activities. The Group
monitors capital with the objective of safeguarding its ability to continue as a going concern and provide return to shareholders.
The Group does not have a target debt equity structure and pursuant to the IPO all external borrowings, except those relating to
leases under AASB 16 are outstanding on the date of the balance sheet.
b. Market risk
Market risk is the risk that changes in market prices – such as foreign exchange rates and interest rates – will affect the Group’s
income or the value of its holdings of financial instruments. The Group uses derivatives to manage market risk related to foreign
currencies. All such transactions are carried out within the guidelines of the Group’s risk management policies.
Foreign exchange risk
The Group’s reporting currency is the USD and it is exposed to currency risk on accounts receivable and payable denominated in the
Australian Dollar (AUD), Euro (EUR), British Pound (GBP) and Canadian Dollar (CAD). In respect of other monetary assets and liabilities
denominated in foreign currencies, the Group’s policy is to ensure the net exposure is kept to an acceptable level by buying or selling
foreign currencies at spot rates when necessary.
81
Nitro Annual Report 2020
Notes to the Financial Statements
Exposure to foreign currency risk
The summary quantitative data about the Group’s exposure to foreign currency risk is as follows:
2020
2019
AS AT 31 DECEMBER
AUD’000
EUR’000
GBP’000
CAD’000
AUD’000
EUR’000
GBP’000
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Loans and borrowings
2,017
1,849
1,519
–
4,708
1,074
1,126
1,069
201
469
142
–
–
56
–
–
58,502
1,452
1,646
557
899
990
–
1,680
101
210
58
–
Sensitivity analysis
A 10% strengthening or weakening of foreign currencies to US dollar exchange rate would have increased/(decreased) the net assets
denominated in foreign currencies by the amounts shown below. This analysis assumes that all other variables, in particular interest
rates, remain constant.
US$’000
10% increase
10% decrease
Interest rate risk
2020
(754)
921
2019
(3,794)
4,637
The Company monitors changes in interest rates regularly to ensure the best possible return on deposits. Changes to interest rates in
this context are not considered a significant financial risk.
As at 31 December 2020, the Company has no borrowings other than those related to leases under AASB 16 and hence not exposed
to significant financial risk in this context.
c. Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are
settled by delivering cash or another financial asset. The Group’s objective is to maintain a balance between continuity of funding and
flexibility through the use of its cash and funding requirements. The Group continually monitors forecast and actual cash flows and
the maturity profiles of assets and liabilities to manage its liquidity risk.
Exposure to liquidity risk
The tables below present the Group’s financial liabilities into relevant maturity groupings based on their contractual maturities for
all non-derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due
within 12 months equal their carrying balances as the impact of discounting is not significant.
2020
US$’000
Trade and other payables
Lease liability
Total non-derivatives
12 MONTHS
OR LESS
BETWEEN
1 AND 3 YEARS
BETWEEN
3 AND 5 YEARS
6,802
1,097
7,899
–
572
572
–
–
–
TOTAL
CONTRACTUAL
CASH FLOWS
6,802
1,740
8,542
CARRYING
AMOUNT
(ASSETS)/
LIABILITIES
6,802
1,669
8,471
82
Nitro Annual Report 2020 2019
US$’000
Trade and other payables
Lease liability
Total non-derivatives
17. Auditors’ remuneration
12 MONTHS
OR LESS
BETWEEN
1 AND 3 YEARS
BETWEEN
3 AND 5 YEARS
5,568
1,393
6,961
–
1,540
1,540
–
–
–
TOTAL
CONTRACTUAL
CASH FLOWS
5,568
3,134
8,702
CARRYING
AMOUNT
(ASSETS)/
LIABILITIES
5,568
2,933
8,501
During the year, the following fees were paid for services provided by the Group’s auditors, PricewaterhouseCoopers Australia, and its
network firms:
PWC AUSTRALIA
NETWORK FIRMS OF PWC AUSTRALIA
TOTAL
2020
2019
2020
2019
2020
2019
US$’000
Assurance services
Audit and review of
financial statements
Other assurance
services1
Total assurance
services
Non-assurance
services
Tax compliance
services
Total non-assurance
services
Total remuneration
227
–
227
80
80
307
238
635
873
37
37
910
24
–
24
7
7
31
22
–
22
41
41
63
251
–
251
87
87
338
18. Related party transactions
The following table summarises the remuneration paid and included in the Expenses for the year ended 31 December 2020:
Key management personnel:
US$’000
Short term employee benefits
Post-employment benefits
Share-based payments
Others
Employee benefit expenses
2020
1,387
20
1,105
83
2,595
260
635
895
78
78
973
2019
1,508
4
656
160
2,328
83
Nitro Annual Report 2020
Notes to the Financial Statements
Transactions and balances with key management personnel
During the year ended 31 December 2020 and as at that date, an amount aggregating nil (31 December 2019: $0.12 million) was
receivable from one KMP in relation to exercise of share options vested and exercised on 11 December 2019. These amounts were
repaid on 9 January 2020.
During the year ended 31 December 2019, loans provided to KMP in order to exercise share options under the Historical LTIP
outstanding as at 31 December 2018 aggregating $0.02 million were repaid in September 2019.
Transactions with related entities
A number of Directors of the Group currently hold or have held positions in other companies (personally related entities) where it
is considered they control or significantly influence the financial or operating policies of those entities. There were no reportable
transactions with those entities and no amounts were owed by or owed to the Group to/by personally related entities at 31 December
2020 (31 December 2019: Nil).
19. Parent entity information
US$’000
Result of the parent entity
(Loss)/profit for the year
Total comprehensive (loss)/profit for the year
Financial position of the parent entity as at 31 December
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Contributed equity
Reserves
Accumulated losses
Total equity
Accounting policy
2020
2019
(1,666)
(1,666)
54,150
87,750
1,083
1,170
86,580
90,344
(3,945)
181
86,580
(3,555)
(3,555)
55,736
89,453
1,108
1,498
87,955
90,209
(4,101)
1,847
87,955
The financial information for the parent entity, Nitro Software Ltd, has been prepared on the same basis as the consolidated financial
statements, except as set out below.
Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the consolidated financial statements of
Nitro Software Ltd. Dividends received from associates are recognised in the parent entity’s profit or loss when its right to receive the
dividend is established.
Financial guarantees
Where the parent entity has provided financial guarantees in relation to loans and payables of subsidiaries for no compensation, the
fair values of these guarantees are accounted for as contributions and recognised as part of the cost of the investment.
84
Nitro Annual Report 2020
Share-based payments
The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the group is
treated as a capital contribution to that subsidiary undertaking. The fair value of employee services received, measured by reference
to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a
corresponding credit to equity.
20. Commitments and contingencies
The Group had no contingent liabilities as at 31 December 2020 (31 December 2019: Nil).
The Group has no significant commitments as at 31 December 2020 other than those disclosed in Note 15.
21. Events occurring after the reporting period
No matters or circumstances have occurred subsequent to period end that have significantly affected, or may significantly affect, the
operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial years.
85
Nitro Annual Report 2020 Directors Declaration
In accordance with a resolution of the Directors of Nitro Software Limited, we state that:
In the opinion of the Directors:
a. The consolidated financial statements and notes as set out on pages 56 to 85 and the Remuneration report on pages 30 to 54
forming part of the Directors’ report, are in accordance with the Corporations Act 2001 including:
i. Giving a true and fair view of the Group’s financial position as at 31 December 2020 and of its performance for the financial year
ended on that date; and
ii. Complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b. There are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable.
c. The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A
of the Corporations Act 2001 for the year ended 31 December 2020.
d. The Directors draw attention to Note 2a to the consolidated financial statements on page 61, which includes a statement of
compliance with International Financial Reporting Standards.
On behalf of the Board
Kurt Johnson
Executive Chairman
24 February 2021
Sam Chandler
Chief Executive Officer
24 February 2021
86
Nitro Annual Report 2020 Independent Auditors’ Report
87
PricewaterhouseCoopers, ABN 52 780 433 757 2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. Independent auditor’s report To the members of Nitro Software Limited Report on the audit of the financial report Our opinion In our opinion: The accompanying financial report of Nitro Software Limited (the Company) and its controlled entities (together the Group) is in accordance with the Corporations Act 2001, including: (a)giving a true and fair view of the Group's financial position as at 31 December 2020 and of itsfinancial performance for the year then ended(b)complying with Australian Accounting Standards and the Corporations Regulations 2001.What we have audited The Group financial report comprises: ●the consolidated statement of financial position as at 31 December 2020●the consolidated statement of comprehensive income for the year then ended●the consolidated statement of changes in equity for the year then ended●the consolidated statement of cash flows for the year then ended●the notes to the financial statements, which include significant accounting policies and otherexplanatory information●the directors’ declaration.Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. Nitro Annual Report 2020 Independent Auditors’ Report
Independent auditor’s report
To the members of Nitro Software Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Nitro Software Limited (the Company) and its controlled entities
(together the Group) is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group's financial position as at 31 December 2020 and of its
financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
●
●
●
●
●
●
the consolidated statement of financial position as at 31 December 2020
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the financial statements, which include significant accounting policies and other
explanatory information
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
88
Nitro Annual Report 2020 Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
Audit scope
● For the purpose of our audit we used overall Group
● Our audit focused on where the Group made
materiality of $0.4m, which represents
approximately 1% of the Group’s revenue from
ordinary activities.
subjective judgements; for example, significant
accounting estimates involving assumptions and
inherently uncertain future events.
● The Group operates across a single operating
segment, being the provision of software as a
service. It’s head office function is based in
Melbourne, Australia.
● We applied this threshold, together with
qualitative considerations, to determine the scope
of our audit and the nature, timing and extent of
our audit procedures and to evaluate the effect of
misstatements on the financial report as a whole.
● We chose Group revenue because, in our view, it is
the benchmark against which the performance of
the Group is most commonly measured.
● We utilised a 1% threshold based on our
professional judgement, noting it is within the
range of commonly acceptable thresholds.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit and Risk Committee.
89
Nitro Annual Report 2020 Independent Auditors’ Report
Key audit matter
How our audit addressed the key audit matter
Revenue Recognition
(Refer to note 5) [$40.2m]
Our audit procedures included, amongst others:
The Group recognised revenue of $40.2m, which is
predominantly comprised of the following revenue
streams:
•
•
Subscription software services ($21.2m)
Perpetual licenses maintenance and support
revenue ($18.9m)
Revenue recognition is a key audit matter due to:
- The significance of revenue to the Group's financial
results.
- The extent of deferred revenue recognised by the
Group and the related revenue recognition during the
year.
- The level of judgement applied in the key
assumptions used to capitalise and subsequently
amortise contract acquisition costs.
-
-
-
-
-
-
-
-
developed an understanding of the process
undertaken by the Group to recognise revenue
from the sale of perpetual licenses and
subscriptions, including factors influencing
whether the revenue is recognised on
principal or agency basis
tested the operating effectiveness of key
controls over the cash allocation process to
allocate cash receipts to the appropriate
invoice and customer
performed risk-based targeted procedures
over revenue transactions based on an
expected pathway and agreed a sample of
transactions to supporting documents
used computer assisted audit techniques to
analyse revenue transactions not consistent
with an expected pathway
tested a sample of contracts to supporting
documentation to ensure appropriate deferral
of revenue
obtained the contract acquisition cost
calculation, and performed tests over the
mathematical accuracy of the calculation
assessed the appropriateness of the estimate
of the useful life and amortisation in light of
the latest available information of contract
periods and renewals
evaluated the adequacy of the disclosures
made in Note 5 in light of the requirements of
Australian Accounting Standards.
*The above amounts have been rounded.
90
Nitro Annual Report 2020 Share Based Payments
(Refer to note 7) [$3.0m]
Our audit procedures included, amongst others:
The Group recognised a share-based payment expense
of $3.0m during the year.
Alongside its existing short-term and long-term
incentive plans, the Group approved new long-term
incentive plans during the year ended 31 December
2020.
This was a key audit matter due to the judgement in
the key assumptions and estimates used in determining
the fair value of the share-based payment expense,
including the determination of the grant date,
estimated volatility over the period, and probability of
meeting vesting conditions.
-
-
-
-
-
-
developed an understanding of the nature of
the incentive schemes
read the terms and conditions of the various
incentive plan agreements
evaluated the Group’s assessment of the
likelihood of meeting the vesting conditions
attached to each of the agreements
tested key data and evaluated assumptions
used in the vesting schedule and performed
mathematical accuracy checks
assessed the Group's methodology for
calculating the fair value of share options, and
agreed the valuation inputs to supporting
documents including external data and
employee offer letters
evaluated the adequacy of the disclosures
made in Note 7 in light of the requirements of
Australian Accounting Standards.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 31 December 2020, but does not include
the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
91
Nitro Annual Report 2020 Independent Auditors’ Report
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of
our auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 30 to 54 of the directors’ report for the
year ended 31 December 2020.
In our opinion, the remuneration report of Nitro Software Limited for the year ended 31 December
2020 complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Niamh Hussey
Partner
Melbourne
24 February 2021
92
Nitro Annual Report 2020 Shareholder Information
Additional information
As required by the Australian Securities Exchange and not shown elsewhere in this report is as follows. The information is current as
at 15 February 2021.
Distribution of ordinary shares:
RANGE
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 Over
Total
Unmarketable parcels
Minimum $ 500.00 parcel at $2.9700 per unit
Substantial shareholders
TOTAL HOLDERS
UNITS
% UNITS
3,728
2,620
669
529
61
1,941,004
6,610,442
5,101,019
12,735,613
163,613,062
7,607
190,001,140
1.02
3.48
2.68
6.70
86.12
100.00
MINIMUM
PARCEL SIZE
169
HOLDERS
248
UNITS
31,481
The following have disclosed a substantial shareholder notice in the period to 15 February 2021:
SUBSTANTIAL HOLDER
Starfish Technology Fund II, LP
Battery Ventures
Regal Funds Management Pty Ltd
Australian Ethical Investment Limited
Richard Wenzel
Sam Chandler
NUMBER OF ORDINARY SHARES IN WHICH
THE HOLDER (OR THEIR ASSOCIATES)
HAVE A RELEVANT INTEREST
% OF
VOTING
POWER
17,532,422
16,589,968
15,285,151
10,730,909
9,650,188
9,191,880
9.23
8.73
8.03
5.64
5.08
4.84
Unlisted employee share options
As at 15 February 2021, there were a total of 18,746,548 unlisted share options on issue.
RANGE
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 Over
Total
TOTAL HOLDERS
1
39
23
82
18
UNITS
45
141,414
187,865
2,408,087
15,739,137
163
18,476,548
DATE OF
INTEREST
NOTICE
11 Sep 20
24 Sep 20
22 Dec 20
20 Oct 20
13 Dec 19
15 Jun 20
% UNITS
0.00
0.77
1.02
13.03
85.18
100.00
93
Nitro Annual Report 2020 Shareholder Information
Unquoted restricted share awards
As at 15 February 2021, there were a total of 2,705,644 unquoted restricted share awards on issue.
RANGE
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 Over
Total
TOTAL HOLDERS
UNITS
% UNITS
–
–
–
–
5
5
–
–
–
–
–
–
–
–
2,705,644
2,705,644
100.00
100.00
Unlisted performance rights
As at 15 February 2021, there were a total of 2,206,454 unquoted restricted share awards on issue.
RANGE
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 Over
Total
Voting rights:
Ordinary shares
TOTAL HOLDERS
UNITS
% UNITS
–
–
–
3
7
–
–
–
138,106
2,068,348
10
2,206,454
–
–
–
6.26
93.74
100.00
Refer to note 14(a) on page 78.
Employee share options
There are no voting rights attached to the employee share options.
On-market buy-back
There is no current on-market buy-back of shares.
Securities purchased on-market
During the year ended 31 December 2020, 100,000 equity shares were purchased on market at an average price of AUD 1.47 per share.
Securities subject to voluntary escrow
The Company has 57,843,145 shares in escrow until the Company releases the full year financial results for the year ended
31 December 2020. The Company has 10,675,286 unlisted options that are in escrow until the Company releases the full
year financial results for the year ended 31 December 2020. The full year financial results are expected to be released on
24 February 2021.
94
Nitro Annual Report 2020 Twenty largest shareholders
RANK NAME
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NATIONAL NOMINEES LIMITED
STARFISH TECHNOLOGY FUND II LP
BATTERY VENTURES X LP\C
VISTRA TRUST (SINGAPORE) PTE LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CS THIRD NOMINEES PTY LIMITED
UBS NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
SAM CHANDLER
VENTURIAN PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
CS FOURTH NOMINEES PTY LIMITED
RICHARD CROCKER
M&S SKYLEISURE PTY LTD
RICHARD WENZEL
CRAIG CHANDLER + DI CHANDLER
NATIONAL NOMINEES LIMITED
MR BRADLEY SCOTT FOLLETT
MR PETER JOHN GRIFFIN
Totals: Top 20 holders of ORDINARY FULLY PAID SHARES (Total)
Total Remaining Holders Balance
UNITS
22,087,928
18,938,463
17,393,001
16,424,071
12,954,988
9,543,721
8,954,380
8,678,861
8,531,805
3,830,400
3,132,203
3,081,482
2,982,819
2,942,222
2,836,624
1,703,340
1,492,375
1,467,770
1,452,203
1,300,423
149,729,079
40,272,061
% UNITS
11.63
9.97
9.15
8.64
6.82
5.02
4.71
4.57
4.49
2.02
1.65
1.62
1.57
1.55
1.49
0.90
0.79
0.77
0.76
0.68
78.80
21.20
95
Nitro Annual Report 2020 Appendix
SaaS metrics
Nitro uses certain information, measures and ratios to manage and report on performance which are prepared on a basis that is not
in accordance with all relevant accounting standards (‘Non-Statutory Information’). This Non-Statutory Information may exclude certain
transactions, or present transactions or balances on a different recognition and measurement basis from that required or permitted
by accounting standards. These measures do not have prescribed definitions and therefore may not be directly comparable to
similarly titled measures presented by other entities.
Annual Recurring Revenue (‘ARR’) is the annual amount of revenue the Group will recognise from subscription-based licensing
agreements with customers who have entered into multi-year agreements for the right to access the Group’s software. The typical
subscription contract length is three years. ARR represents the annual value of subscription revenue under such contracts.
Nitro’s multi-year subscription-based licensing contracts provide visibility into revenue in future periods due to the recurring nature of
those revenue streams. ARR is calculated by multiplying the monthly subscription revenue in the last month of the financial reporting
period by 12.
New ARR Added measures the incremental ARR added during a financial reporting period. The growth in ARR provides additional
predictability and visibility into future revenue for the Group. New ARR added is calculated by subtracting the total monthly
subscription revenue in the last month of the prior reporting period from the total monthly subscription revenue in the last month of
the current financial reporting period, multiplied by 12.
Net Revenue Retention (‘NRR’) is the revenue generated in the current financial reporting period from subscription customers
who were using the Group’s software in the prior financial reporting period, net of churn. NRR measures the incremental recurring
revenue the Company generates from its existing subscription customers as they expand their usage of the Group’s solutions, which
may be a result of adding additional licences within their organisation, or by expanding usage into new areas of their organisation
that previously did not use Nitro’s solution. NRR greater than 100% is a potential indicator of customer satisfaction and implies that
customers are expanding their use of the Group’s software solutions over time. NRR is calculated by dividing the subscription and
maintenance ARR from subscription customers in the last month of the period, by the subscription and maintenance ARR from the
same cohort of subscription customers over the same period in the prior year.
Customer Retention Rate is the percentage of customers that renew their subscription agreements at the expiration of their current
contact term as measured on an annual contract value basis. The Group believes customer retention rates can be indicative of
customer satisfaction with Nitro’s software solutions and customer service. The inverse of the customer retention rate is commonly
referred to as customer churn.
Lifetime Value/Customer Acquisition Cost (‘LTV/CAC’) measures the ratio of ‘lifetime value’ per customer to ‘customer acquisition
cost’. The LTV/CAC ratio compares the value of a customer over their lifetime, compared to the cost of acquiring them. LTV/CAC is
calculated as follows:
• LTV = (new bookings/number of new customers)/(1- customer retention rate); and
• CAC = (selling expense + direct marketing expense + marketing personnel expense)/(number of new customers).
Gross Profit is revenue less cost of sales. Gross profit represents the amount the Company is able to retain after paying the cost
directly associated with the sales of its products. Gross margin is gross profit expressed as a percentage of total revenue.
Operating EBITDA is earnings before share-based payments, foreign currency fluctuations, interest, taxation, depreciation and
amortisation and other identifiable non-operating expenses such as IPO costs etc. Nitro uses EBITDA before share-based payments
to evaluate the operating performance of the Company without the non-cash impact of depreciation and amortisation, and before
share-based compensation, interest and taxation.
EBITDA is earnings before interest, taxation, depreciation and amortisation. Nitro uses EBITDA to evaluate the operating performance
of the Company without the non-cash impact of depreciation and amortisation, and interest and taxation. EBITDA should not be
considered as an alternative to measures of cash flow under AASB and investors should not consider EBITDA in isolation from, or as a
substitute for, an analysis of the results of Nitro’s operations.
Although the Directors believe that these measures provide useful information about Nitro’s financial performance, they should
be considered as supplements to the measures that have been presented in accordance with the AASB’s and IFRS and not as a
replacement for them. Because Non-Statutory Information is not based on AASB’s, IFRS, or any other recognised body of accounting
standards, it does not have prescribed definitions, and the way Nitro calculates these measures may differ from similarly titled
measures used by other companies. Investors should therefore not place undue reliance on Non-Statutory Information.
96
Nitro Annual Report 2020 Corporate Directory
Registered Office
Level 7, 300 Collins Street,
Melbourne, VIC, 3000
Australia
Corporate Office
Suite 1500
150 Spear Street
San Francisco, CA 94105
United States of America
Independent Auditor
PricewaterhouseCoopers
2 Riverside Quay
Southbank VIC 3006
Australia
Investor Relations
Email: InvestorRelations@gonitro.com
Shareholder enquiries
Computershare Investor Services Pty Limited
Yarra Falls, 452 Johnston Street
Abbotsford VIC 3067
Australia
Website
https://ir.gonitro.com/Investor-Centre/
97
Nitro Annual Report 2020